central bank does not want to see its currency fall in value, it may pursue ________ monetary policy to ________ the domestic interest rate, thereby strengthening its currency. Question 28 options: a) contractionary; raise b) expansionary; lower c) expansionary; raise d) contractionary; lower
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- Can you think of any major disadvantages to dollarization? How would a central bank work in a country that has dollarized?9 In Malaysia, the responsibility in implementing monetary policy is under the authority of Ministry of Finance Ministry of Economic Affairs Bank Negara Malaysia Securities CommissionCASE STUDY 18-4 Effect of Monetary Policy in the United States and Other OECD Countries Table 18.3 shows the effect of a 4 percent increase in the money supply (expansionary monetary policy) in the United States or in other OECD countries on the gross national product (GNP), consumer price index (CPI), interest rate, currency value, and current account of the United States and other OECD countries. The OECD—the Organization for Economic Cooperation and Development—included all 24 of the world’s industrial countries at the time of the exercise. The simulation results were obtained by using the Multi-Country Model of the Federal Reserve Board. Although the effects of an increase in the money supply are felt over several years, the results reported in Table 18.3 show the effect in the second year after the money supply increased. Part A of the table shows that a 4 percent increase in the U.S. money supply results (through the multiplier process) in a 1.5 percent…
- Due to the huge inflow of money to Spain, price levels have begun to increase. The government worries that this huge money supply will be an economic problem soon. Which of these monetary policies will work to solve this problem? a. Increase cash reserve ratio, increase interest rates and buy government bonds b. Decrease cash reserve ratio, decrease interest rates and sell government bonds c. Decrease cash reserve ratio, increase interest rates and sell government bonds d. Increase cash reserve ratio, increase interest rates and sell government bonds2. Discuss THREE monetary strategies currently implemented in your country 3. What are the benefits of the type of monetary policy strategies that instituted mentioned above? What were the pitfalls in the strategy?When current output is greater than potential output, which of the given monetary policies is the Federal Reserve (the Fed) likely to enact? - decreasing reserves to increase interest rates - increasing reserves to decrease interest rates - stimulating consumer spending by manipulating tax rates - making imports more costly to increase domestic spending Which of the given statements is the most direct result of the correct monetary policy from the first question? - increases in sales of domestically made goods - decreases in sales of domestically made goods - decreases in investment and a slowing of output growth - increases in investment, aggregate demand, and long‑run growth
- 60. Suppose the central bank wishes to increase the money supply directly. To do so, it could buy government securities on the open market. sell some of its foreign currency assets. sell government securities on the open market. change the price level. reduce its deposits at commercial banks.1)Identify one possible expansionary monetary policy. 2)Carefully explain in as much detail as possible, how the chosen action will impact the money market? 3)illustrated the overall impact of the chosen action on the money market In 2019, while there was a mixed approach to monetary policy-setting in the Caribbean, overall the monetary policy stance in the region remained accommodative. Jamaica, for instance, continued to pursue an expansionary monetary policy with the Bank of Jamaica cutting its overnight rates four times in 2019. The overnight rates were reduced from 1.75% in December 2018 to a historic low of 0.50% in August 2019. In contrast, the Central Bank van Suriname increased the reserve requirement for foreign currency deposits and required that at least half of commercial banks’ USD cash deposits and all of the EUR deposits be held at the Bank, in order to maintain a stable exchange rate.Further, despite the subdued economic activity, the Central Bank of Trinidad…Assume that Canada is currently experiencing an inflationary gap. Required: Identify whether the Bank of Canada will need to raise or lower interest rates and buy or sell bonds. Explain how the recommended monetary policy from part (a) will affect Canada’s exports and the unemployment rate. If the Bank of Canada buys bonds in the market, describe how the supply curve for money supply will be affected.
- explain the influences of monetary policy after an increase in interest rates on 1.Asset Prices 2.Price levels and economic activity 3.Exchange RatesMoney velocity in the country of Ecoland is always stable. In 2019 (the base year), the money supply was $250 billion. In 2020, the money supply increased to $350 billion, the price level increased by 25 percent, and nominal GDP equaled $1400 billion. By how much did real GDP increase between 2019 and 2020? A) $15 billion B) $ 50 billion C) $12.5 billion D) $150 billionAssume a country’s inflation level is considered too high, and unemployment levels too low–Banks conclude that the economy is ‘overheated’ and attempts to use monetary policy. Describe, with the use of a figure: How the banks go about implementing such monetary policy The effects this has on interest rates The quantity of money in the market The process through which this affects the level of expenditure in the economy.