--%>
Assignment Help - homework help

Illustrates the term monetary policy

Illustrates the term monetary policy?

E

Expert

Verified

Monetary Policy:

It refers to the programs adopted through the central bank to control the supply of money. The central bank may resort to open market operations, variations in bank rate or changes within the variable reserve ratio. There open market means the purchase and sale of government securities and bonds. Within the boom period the central bank sells government securities and bonds to the public that helps to withdraw money by the public. Throughout periods of depression the central bank purchases government securities that increase the cash supply in the economy. It helps to increase investment.

The central bank purchase government securities that raise the cash supply in the economy. It assists to increase investment. The central bank might change the bank rate or rediscount rate. The bank rate is the rate at which commercial banks borrow from central bank. When the central bank raises the bank rate the commercial banks in turn will increase their discount rates for the public. It discourages public borrowing and this decreases investment. Throughout the depression the bank rate is lowered that will end up the raised investment. The central bank can control the money supply by changing the variable reserve ratio. While the central bank needs to reduce the credit creation capacity of commercial banks, this will raise the ratio of the deposits to be held through the commercial bank as reserve along with the central bank.

   Related Questions in Managerial Economics

  • Q : Income and Substitution Effects of

    When the substitution effect of a wage raise dominates the income effect, in that case the: (1) labor supply curve will be "backward bending." (2) value of the marginal product will exceed the wage rate. (3) labor force participation

    		•
  • Q : Negatively sloped over wage ranges The

    The supply curve of the labor is negatively sloped over wage ranges where the: (1) the demand for leisure rises along with income. (2) leisure is an inferior good. (3) people offer more hours of labor at higher wages. (4) some people

    		•
  • Q : Profit Maximization and the Demand for

    An increase within competitively-set wages tends to cause firms to adjust hence there are reductions into the: (1) amounts of labor most firms hire. (2) value of the marginal productivity of workers. (3) marginal profit from hiring labor. (4) technolo

    		•
  • Q : Linear supply curves and elasticity

    Along two supply curves which are straight lines by the origin, the price elasticity of supply as: (w) is below 1 for all prices and quantities upon both curves. (x) is less for a given quantity beside the steeper curve. (y) equals on

    		•
  • Q : Problem of adverse selection Signaling

    Signaling may worsen the problem of adverse selection when: (w) potential agents do not transmit any types of signals. (x) job applicants increasingly signal with phony degrees. (y) employers discriminate on the basis of race or gender. (z) severe rec

    		•
  • Q : Strategy probable to make a cartel A

    A strategy probable to make a cartel successful would be for cartel members to: (w) give heterogeneous goods. (x) stagger the amount by that they raise prices. (y) have set enforceable production quotas. (z) keep high prices when several fringe compet

    		•
  • Q : Illustrates fundamental characters of

    Illustrates the fundamental characters of human existence given by Lionel Robbins?

    		•
  • Q : Surpluses quantity for Supply and Demand

    When an exceptionally warm winter caused the quantity of cashmere sweaters supplied to exceed the quantity demanded at the present market price, in that case: (1) cashmere sweaters will be more heavily demanded subsequent year than this year. (2) an overload of cashme

    		•
  • Q : Equilibrium prices and quantities

    French toast and pancakes and both are close substitutes. Assume that good weather yields a bumper crop of pancakes and decreases the price of pancakes. Into the market for French toast: (1) equilibrium price and quantity both increase.(2) competition increases the su

    		•
  • Q : Objectives ans uses Help to achive the

    Help to achive the other objectives of the firm like industry leadership,expansion implementation of policies

    		•