Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 12, Problem 14E
To determine
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Monetary policy as one of the macroeconomic policies is generally implemented in line with the cycle of economic activity (business cycle). Based on this, answer the following questions: a) Explain what monetary policy is appropriate to apply when there is a decline in GDP, economic growth slows and there is a decline in the prices of goods? b) Explain what monetary policy is appropriate to apply when there is an increase in the amount of real output or economic growth and an increase in the price of goods? Explain!
Why would a central bank implement a monetary policy when the inflation level is higher than desired, and unemployment levels are lower than expected?
Describe how a central bank might go about implementing such monetary policy, the subsequent effects this has on interest rates, the quantity of money in the market, and the process through which this affects the level of expenditure in the economy.
The following is TRUE about monetary policy EXCEPT,
A) It uses interest rate and money supply as monetary tools.
B) It manages the creation and flow of money and credit in the economy.
C) It relates to revenue and expenditure by government budget.
D) It aims to control the money supply and regulate the monetary sector.
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Macroeconomics (Fourth Edition)
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- Discuss the concept of "monetary policy". Explain the types of monetary policies and the means to effect themarrow_forwardPlease label your answers to the following questions clearly. (a) Define what is meant by the term monetary policy. (b) Outline what actions the central bank should take in the money market in response to the emergence of significant inflation, and briefly explain what consequences this would have for that market. (c) Briefly describe two ways in which the changes outlined in your answer to Part (b) would be transmitted to the wider economy.arrow_forwardGovernments are responsible for maintaining full employment, price stability, and economic growth – using fiscal and monetary policies. Evaluate how the government of the United States achieves these objectives with the implementation of a Stimulative Monetary Policy. Clearly state the economic conditions that would justify the use of a stimulative policy, explain the measure(s) that would be taken and the anticipated impact.arrow_forward
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