EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
4th Edition
ISBN: 8220100668203
Author: Mishkin
Publisher: PEARSON
Question
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Chapter 24, Problem 3Q
To determine

To Explain:

The response of the monetary policy makers to stabilize the economy to the following shocks:

  1. Decline in autonomous consumption
  2. Decrease in financial frictions
  3. Increase in government spending
  4. Rise in taxes
  5. Appreciation of the domestic currency

Concept introduction:

Autonomous Consumption: The level of consumption that is not dependent on the income level of the consumer.

Financial Friction: It is the difference between the return that the businesses earn from capital and the market cost of capital. 

Currency Appreciation: When the value of a currency increases with respect to one or more foreign reference currencies, it is known as currency appreciation.

Monetary Policy: It is a set of policies using which the central bank of a country can control the cost of borrowing that is interest rate and the monetary base or the supply of money in the economy.

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