--%>
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 : Explain short term Demand forecasting

    Explain short term Demand forecasting.

    		•
  • Q : Social Welfare and Efficiency on Labor

    Inefficiency may exist within a labor market while a firm only hires labor up to a certain point where: (w) the value of labor’s marginal product equals the wage rate. (x) VMP > MRC. (y) MPPL = w/P. (z) the last unit of labor adds as much to

    		•
  • Q : States the term Demand Analysis States

    States the term Demand Analysis?

    		•
  • Q : Profit Maximization in Labor Market and

    As a firm is a pure competitor in both the labor market and during the sale of its product, this will hire labor where: (w) profit is maximized. (x) marginal revenue product = marginal resource cost. (y) wage = value of the marginal product. (z) All o

    		•
  • Q : Use of Screening Device Screening

    Screening devices used while employers try to stop adverse selection through applicants for positions do not comprise: (1) reviewing résumés to identify applicants’ qualifications. (2) needing non-compete clauses which prevent new

    		•
  • Q : Initially purely competitive labor

    When this purely competitive labor market is firstly into equilibrium at D0L, S0L, raise in labor productivity will result within equilibrium being attained at: (w) D0L, S0L. (x) D1L, S0L

    		•
  • Q : Model of purely competitive resource

    The model of purely competitive resource markets describes how: (1) U.S. income distribution patterns are determined. (2) wages are determined in the United States. (3) resource prices would be determined in efficient markets. (4) competition leads to

    		•
  • Q : Diminishing returns imply economic

    This is not true that the law of diminishing returns which it: (i) Consists applications in numerous areas outside economics. (ii) Is encountered in many ways in economics. (iii) Implies that continually increasing production ultimately entails increa

    		•
  • Q : States the implicit cost concept briefly

    States the implicit cost concept briefly.

    		•
  • Q : Minimum supply to specified amounts of

    If the owner of a resource is paid in excess of the minimum needed to supply specified amounts of the resource, in that case the owner is the beneficiary of: (1) economic rents. (2) wage premiums. (3) excess profits. (4) surplus values. (5) capitaliza

    		•