--%>
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 : What is Equilibrium What do you mean by

    What do you mean by the term Equilibrium? Also state its proper definition.

    		•
  • Q : Why Exceptional Demand Curve Explain

    Explain with examples the reasons for exceptional demand curve

    		•
  • Q : Equilibrium The equilibrium interest

    The equilibrium interest rate is determined

    		•
  • Q : Calculating Trade balance Suppose the

    Suppose the value of exports of goods of a country is Rs. 1,000 crores and the value of imports of goods is Rs. 1,200 crores, what will be the trade balance (or balance of trade)?

    		•
  • Q : Founder of utilitarianism The founder

    The founder of utilitarianism be: (1) Adam Smith. (2) John Stuart Mill. (3) Jeremy Bentham. (4) Feodor Dostoyevsky. (5) Thorstein Veblen. (6) Alfred Marshall. Can someone help me in getting through this problem.

    		•
  • Q : IMF? In saying that the present system

    In saying that the present system of floating exchange rates is managed we mean that: IMF officials determine exchange rates on a day-to-day basis. countries that allow their exchange rate to move freely will lose their borrowing privileges with the IMF. the value of any IMF member's currency

    		•
  • Q : Explain model of economy growth. The

    The origin of economic growth can be traced back to Adam Smith's Wealth of Nations. InSmith's view, economic growth of a nation depends on the 'division of labour' and specialization, and is limited by the limits of div

    		•
  • Q : Supply of foreign currencies into

    What are the main sources of supply of foreign currencies into domestic economy? Answer: A) Foreigners purchasing home country’s goods and services via exports. B) Foreign investment in home country via

    		•
  • Q : Define involuntary unemployment

    Involuntary unemployment: Involuntary unemployment terms to a condition in which people that are willing to work are unable to obtain work.

    		•
  • 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

    		•