--%>
Assignment Help - homework help

How central bank reduce the deflationary gap

Describe any two measures by which a Central Bank can attempt to decrease the gap.

Answer: Central bank can decrease this gap by adopting two measures illustrated below:

Bank rate: Central Bank must reduce the bank rate. The decrease in bank rate lowers the rate of interest and credit becomes low-priced. Consequently, the demand for credit expands and aggregate demand rises.

Open Market Operations: By purchasing the government securities Central Bank injects extra purchasing power into the system that outcomes in the expansion of credit. As an outcome aggregate demand rises.

   Related Questions in Macroeconomics

  • Q : Problem on slope of demand curve The

    The demand curve for DVD games is a straight line, therefore its slope: (1) Is constant, although price elasticity of demand drops/falls as output increases. (2) Price elasticity are both stable. (3) Is constant, although price elasticity of demand increases as the pr

    		•
  • Q : About macroeconomics Do you think that

    Do you think that macroeconomic policy should be designed to achieve a measured unemployment rate of zero? Why or why not should this be the case?

    		•
  • Q : Money-just another good ‘What occurs in

    ‘What occurs in the money market when there is a raise in income?’

    		•
  • Q : Equilibrium of a market How can

    How can Equilibrium of a market be exist?

    		•
  • Q : Problem on value of imports The balance

    The balance of trade demonstrates a deficit of Rs 300 crore. The values of exports are Rs 500 crore. Determine the value of imports? Answer:

    Q : Paradox of Value-High values of

    The fact that most of the necessities for life like water are priced much lower than the frivolities like diamonds is addressed by the: (1) Utilitarian enigma. (2) Law of diminishing marginal utility. (3) Rational ignorance of hypothesis. (4) Paradox of the value. (5)

    		•
  • Q : Define voluntary unemployment Voluntary

    Voluntary unemployment: It refers to a condition when person are not willing to do work at customary market wage rate, though they are receiving a work.

    		•
  • Q : Economics I help with part 2 and the 4

    I help with part 2 and the 4 part question.

    		•
  • Q : Potential GDP The hypothetical

    The hypothetical information in the following table shows what the economic situation will be in 2015 if the Fed does not use monetary policy: Year Potential GDP Real GDP Price Level 2014 $15.2 trillion $15.2 trillion 110.0 2015 $15.6 trillion $15.8 trillion

    		•
  • Q : Functions of central bank Describe

    Describe functions of central bank? Answer: (A) Issue of currency: Central bank is the only authority for the issue of currency

    		•