ECO 1102 Lecture Notes - Lecture 26: Monetary Policy, Overnight Rate, Economic Equilibrium

82 views2 pages
Verified Note
4 Apr 2019
Department
Course
Professor

Document Summary

If central bank declares that contractionary monetary policy inflation is a threat, it will implement a restrictive. Opposite of loose money is called tight money. Sell bonds, contract quantity of money which circulates, ms shifts left, equilibrium rate of interest rises. A higher interest rate is transmitted to the product market where is it is most unwelcome. Investment and consumption spending decrease, aggregate demand shifts left, equilibrium price and gdp decrease. Changing the overnight rate or the bank rate. Raising these rates that they charge to commercial banks makes it more expensive for them to expand credit, so the quantity of reserves available for lending, as does the supply of money contracts. However, cutting these rates would make them less expensive for them to expand credit, therefore the quantity of reserves available for lending rises, as does the supply of money.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related textbook solutions

Related Documents

Related Questions