For some months now, the central bank has reduced the attention it pays to the levels ofinterest rates and has kept a close eye on expansion of the money supply. This policy change has made market interest rates more responsive to the high rate of inflation. a. Why would this policy change have caused interest rates to become more responsive to the high rate of inflation? b. Is this a good or a bad thing?

For some months now, the central bank has reduced the attention it pays to the levels ofinterest rates and has kept a close eye on expansion of the money supply. This policy change has made market interest rates more responsive to the high rate of inflation. a. Why would this policy change have caused interest rates to become more responsive to the high rate of inflation? b. Is this a good or a bad thing?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter6: Government Influence On Exchange Rates

Section: Chapter Questions

Problem 16QA

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