Did Central Banks seem totally unprepared to deal with the pending economic fallout? Is the Central bank more reactive than proactive?

Q: One of the three main tools of the Federal Reserve is fiscal policy.  True  False

A: Central Bank: The central bank is the apex bank of the country that supplies the money or maintains…

Q: Would you say central banks are more reactive than proactive?

A: Central bank is the supreme bank of the nation.

Q: If the central bank desired to increase spending in the economy, using the instruments ofmonetary…

A: Monetary policy is used by the federal reserves also known as the central bank of an economy to…

Q: Why might eliminating the central bank’s independence lead to a more pronounced political…

A: The elimination of central bank independence will lead to severe consequences on the economy : 1. It…

Q: what are the key characteristics of inflation-targeting central banks?

A: Inflation Targeting:- Inflation targeting is a banking system procedure that requires setting an…

Q: Consider the following quote: "Over one and a half million people were laid off from jobs following…

A: For transportation of goods and materials across the nation, mostly petrochemicals were used. So…

Q: What nonconventional monetary policies shift theaggregate demand curve, and how do they work?

A: Nonconventional monetary policy is a series of steps a central bank has taken to put a stop to an…

Q: If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then…

A: Central bank can able to increase and decrease money supply with the help of various tools like…

Q: On which of the following do monetarists and Keynesians disagree? A. Deflation causes unemployment…

A: Aggregate supply curve in Monetarists model is vertical straight line at the full employment…

Q: the Federal Reserve attempts to grow the money supply in a recession. How does such a stimulus…

A: It's commen policy that central bank increase money supply in an economy during recession period.

Q: Banks follow the Fed’s lead to influence the economy and prevent a financial downturn? True or false

A: Fed is the supervisor of all the banks in the nation.

Q: Which policy is more effective—monetary policy or fiscal policy? Why?

A: The monetary and fiscal policy, both are the way or process to balance the economic activities in an…

Q: In what sense can greater central bank independencemake the time-inconsistency problem worse?

A: Time-inconsistency is the issue that occurs when a decision-maker, in particular a policy-maker,…

Q: Why did Friedman and the Monetarists believe that monetary misuse accompanied every severe recession…

A: Inflation means the rise in the price level of goods and services in an economy. It means as the…

Q: Explain in detail how policy rate affects aggregate demand through a monetary transmission…

A: Policy rate: - it is a monetary policy tool of the central bank of a country to control money supply…

Q: How does the Central Bank spend it's

A: National banks influence the amount of cash available for use by trading government protections…

Q: Which of the following is true? When income tax rates fall, it is possible for tax revenues to rise.…

A: These Options are Wrong Because  1) Tax rate cuts influence incomes in two ways. Each tax rate slice…

Q: describe the actions the Federal Reserve took to maintain a healthy economy during the recent…

A: Fed has done so much to prevent the economy from slowing down during the economic crises as an…

Q: Explain two reasons why policy makers might be tempted to renege on an announcement they made…

A: After defining a vision, policymakers are forced to adapt to reality. Reality frequently reveals…

Q: Explain the difference between the Keynesian and the monetarist views on how an increase in the…

A: Keynesian economics emphasizes fiscal policy to control the business cycles in the economy. Keynes…

Q: A central bank that increases the money supply in its economy has more effect on spending the more…

A: It's typical to hear that the central bank "increased interest rates" or "lowered interest rates"…

Q: What explanations have Post-Keynesians forwarded for the comparative failure of Central Banks policy…

A: A financial crisis is an economic term. A financial crisis is a situation where there is a sharp…

Q: Fiscal policy consists of tools used by the Central Bank to control the quantity of money in the…

A: Fiscal policy is the policy in which government modifies the spending levels and taxes to control…

Q: How does inflation targeting help reduce the timeinconsistency problem of discretionary policy?

A: Inflation targeting refers to the setting up of the inflation rate target in the economy. The…

Q: According to Keynesian economists, if people in the economy are not spending enough then the…

A: Keynesian the served the deserving value to the demand side of the economy when it comes influencing…

Q: What is the purpose of Monetary policy? Prove explanations in detail with an exampl

A: Monetary policy is used by the central bank of a country to regulate and  control the entire…

Q: The former chairman of the Federal​ Reserve, Alan​ Greenspan, used the term​ "irrational exuberance"…

A: If the economy grows too fast, asset bubbles form which might go bust and the economy may crash.…

Q: *Does monetary or fiscal policy have a longer time lag?  Why?

A: Monetary policy is defined as the policy adopted by the central bank of the country to influence the…

Q: Which one is better at dealing with inflation: demand-side or supply side policies?

A: The demand-side(D) and supply-side(S) policies are policies used by the government and the monetary…

Q: Is it preferable for central banks to primarily target inflation or unemployment? Why?

A: Unemployment is a situation in which workers in the economy are willing to work at the prevailing…

Q: Explain in detail how policy rate affects aggregate demand through a monetary transmission…

A: Policy rate means interest rate.Interest rate changes can affect aggregate demand through monetary…

Q: Suppose country A has a central bank with full credibility, and country B has a central bank with no…

A:

Q: What incentives arise for a central bank to fall into thetime-inconsistency trap of pursuing overly…

A: Assume the banking sector attempts to spur demand by expanding the money supply while the market is…

Q: Monetary and fiscal policies directly affect the level of activities in the financial market.  Is…

A: Monetary and fiscal policies directly affect the level of activities in the financial market.  Is it…

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.