What is Monetary Policy? | Explained | IB Macroeconomics | IB Economics Exam Review
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- Опубліковано 28 лип 2024
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Glad I could help!
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Awesome! Thanks Shruthi! You may find my website useful as well - www.bradcartwright.com
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What can be a little confusing is that it seems the overall goal is to affect the money supply. The overal money supply is the economic guage and to affect the money supply the Fed raises/lowers interest rates, or buys bonds.
What book do you use sir? Just for reference. Thank you
Brad I was wondering, around 2008 There was the economic stimulus act is that at all Monetary policy or is that socialism??
I am joining your classroom
the increase in economical growth rate is a bad thing if it's not accompanied by a respective increment in production and thus leading to inflation , right ?
Clear
What is the examples of how monetary policy performs in sustaining the economic flow of the country?
Idk
🖤🖤
Monetary policy is determining or controlling the cost to obtain credit.
Using the tools provided to it, the Fed controls the cost to obtain credit. They do not control the money supply but do influence it. Most of the money supply is bank credit and controlling the cost to obtain that credit influences the supply of it. Monetary policy does not control, in any way, the net supply of government liabilities.
Banks have two accounts with the Fed, a securities account and a reserve account. Moving a sum of government liabilities from a bank's securities account to the bank's reserve account is not printing money or increasing the overall supply. It is simply changing the form of the government's liability. Monetary policy is not the creation or destruction of money, that's fiscal policy.
Securities can only be purchased with reserves. Converting those securities back to reserves is not money creation. The creation of reserves only occurs through fiscal policy.
Lower rates incentivizes borrowing. Higher interest rates increase costs (inflation) and disincentivize borrowing. The cost of credit is reflected in the cost of all goods and services. So, increasing the cost to obtain credit will, of course, results in inflation.
right it crisp; thanks