In a "corridor" system of monetary policy, which of the following is true? The interest rate paid on central bank reserves tends to be lower than short- term private sector rates and the central bank's lending facility rate tends to be higher. The interest rate paid on central bank reserves tends to be higher than both short-term private sector rates and the central bank's lending facility rate. Short-term private sector interest rates tend to be higher than both the interest rate paid on central bank reserves and the central bank lending facility rate. Short-term private sector interest rates tend to be lower than both the interest rate paid on central bank reserves and the central bank lending facility rate.

In a "corridor" system of monetary policy, which of the following is true? The interest rate paid on central bank reserves tends to be lower than short- term private sector rates and the central bank's lending facility rate tends to be higher. The interest rate paid on central bank reserves tends to be higher than both short-term private sector rates and the central bank's lending facility rate. Short-term private sector interest rates tend to be higher than both the interest rate paid on central bank reserves and the central bank lending facility rate. Short-term private sector interest rates tend to be lower than both the interest rate paid on central bank reserves and the central bank lending facility rate.

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter14: Modern Macroeconomics And Monetary Policy

Section: Chapter Questions

Problem 7CQ

See similar textbooks

Similar questions

The equilibrium output level in the country of Plutonia is $44 billion, while its potential output is $74 billion. Suppose the central bank of the country implements an expansionary monetary policy. Which of the following is likely to occur? a) An increase in interest rates will stimulate investment, shifting the aggregate demand curve to the right. b) A reduciton in interest rates will lower investment, shifting the aggregate demand curve to the left. c) An increase in interest rates will lower investment, shifting the aggregate demand curve to the left. d) An reduction in interest rates will stimulate investment, shifting the aggregate demand curve to the right.
The purpose of a restrictive monetary policy is to: Select one: a. raise investment demand. b. decrease aggregate demand. c. equate the interest rate and investment. d. supress investment demand. e. increase aggregate demand.
Critically discuss the downside of expansionary monetary policy
Describe the tools used by the Central Bank to implement Monetary Policy.
For each monetary policy implemented by the central bank explain how each one will increase the economic activty: open market operations,the reserve requirement ratio and the discount rate.
Please discuss the role of required reserves as a monetary policy tool by central banks.
Discuss two reasons why a central bank would wish to pursue a contractionary monetary policy
The Australian economy is a small open economy and allows its currency to float against other currencies with occasional central bank intervention. Currently, the RBA has implemented a contractionary monetary policy to stimulate the economy. How would the aims of RBA be achieved in a small open economy like Australia?
In the short run, which of the following is the most likely effect of an unanticipated move to expansionary monetary policy? a. An improvement in technology, which will stimulate growth in the long run b. A decrease in prices proportional to the increase in the money supply c. An increase in real output
The graph below shows relationship between the average annual increase in the price level and the average annual increase in money supply across eight countries. What concept or model, related to monetary policy, does this graph help demonstrate?
Explain in your own words a possible “failure mode” of monetary policy with reference to a particular country of your choice (i.e., a practice among governments which economists consider to be a mistake).
If the objective of monetary policy is to achieve stable inflation, the central bank should accommodate changes in money demand but not changes in inflation expectations. In the face of rising market interest rates, should the central bank increase the money supply or keep the money supply unchanged? How can information from the foreign exchange market help with making the decision?