Monetary policy refers to the use of monetary instruments under the control of the central bank to regulate magnitudes such as interest rates, money supply and availability of credit with a view to achieving the ultimate objective of economic policy. What is dovish stance? If a Fed official is saidRead More →
Example of Fiscal Multiplier The total change in national income is the initial increase in government, or “autonomous,” spending times the fiscal multiplier. Since the marginal propensity to consume is 0.75, the fiscal multiplier would be four. What determines the size of the fiscal multiplier? The size of the fiscalRead More →
Expansionary monetary policy works by expanding the money supply faster than usual or lowering short-term interest rates. … Quantitative Easing, or QE, is another form of expansionary monetary policy. What is the purpose of QE? Quantitative easing (QE) policies include central-bank purchases of assets such as government bonds (see publicRead More →
An expansionary (or loose) monetary policy raises the quantity of money and credit above what it otherwise would have been and reduces interest rates, boosting aggregate demand, and thus countering recession. What is the difference between a tight and loose monetary policy? What is the difference between a tight andRead More →