What is the impact if a central bank does not change its monetary policy at full employment? Output rises above full employment temporarily, price rises relatively quickly Output falls below full employment temporarily, price falls quickly Output stays at full employment, no change in price Output is at full employment, price rise
Monetary Policy and Equation of Exchange
The monetary policy has been defined as the policy that is used by the Federal Reserve (the central bank of the US) or the central bank (the central bank of India is RBI) along with the use of the supply of money to accomplish certain macroeconomic policies. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.
Monetary Economics
As from the name, it is very evident that monetary economics deals with the monetary theory of economics. Therefore, we can say that monetary economics, is that part of economics that provides us with the idea or notion of analyzing money as a holding with its function, which acts as the medium of exchange, the store of value through which the buying and selling are done and also the unit of account. It also helps in formulating the framework of the monetary policy of a bank in an economy which ultimately results in the welfare of the people residing in that particular economy. The monetary policy of an economy also helps to analyze and evaluate the financial health of it.
What is the impact if a central bank does not change its
- Output rises above full employment temporarily, price rises relatively quickly
- Output falls below full employment temporarily, price falls quickly
-
Output stays at full employment, no change in price
-
Output is at full employment, price rise
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