The common traditional consensus among economists is that the central bank cannot target both interest rate and money supply at the same time. The central bank cannot choose to target both the non-borrowed reserves and the overnight rate policy instruments at the same time. a) Demonstrate graphically and in words the result of targeting on non-borrowed reserves. b) Demonstrate graphically and in words the result of targeting on the overnight rate. c) What are the three criteria that apply when choosing a policy instrument.
The common traditional consensus among economists is that the central bank cannot target both interest rate and money supply at the same time. The central bank cannot choose to target both the non-borrowed reserves and the overnight rate policy instruments at the same time. a) Demonstrate graphically and in words the result of targeting on non-borrowed reserves. b) Demonstrate graphically and in words the result of targeting on the overnight rate. c) What are the three criteria that apply when choosing a policy instrument.
Chapter19: Money Creation
Section: Chapter Questions
Problem 12SQ
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The common traditional consensus among economists is that the central bank cannot target both interest rate and money supply at the same time. The central bank cannot choose to target both the non-borrowed reserves and the overnight rate policy instruments at the same time.
a) Demonstrate graphically and in words the result of targeting on non-borrowed reserves.
b) Demonstrate graphically and in words the result of targeting on the overnight rate.
c) What are the three criteria that apply when choosing a policy instrument.
a) Demonstrate graphically and in words the result of targeting on non-borrowed reserves.
b) Demonstrate graphically and in words the result of targeting on the overnight rate.
c) What are the three criteria that apply when choosing a policy instrument.
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