In periods when home prices declined substantially, some homeowners blamed the Central bank. In other periods when home prices increased, homeowners gave credit to the Central bank. How can the Central bank have such a large impact on home prices? How could news of a substantial increase in the general inflation level affect the Central bank’s monetary policy and thereby affect home prices?
Monetary Policy and Interest Rate
Monetary policy refers to the policy which is enforced by the central bank of the country to control the money supply and economic development of the country. The main aim of monetary policy is to manage inflation, consumption, and growth of the economy. The central bank influences interest rates to manage the money supply. In monetary policy, the central bank may revise the interest rate to increase and decrease the flow of money.
Development of the US Monetary System
The monetary system of a country refers to the system in which a government provides money in the economy of the country. In the modern-day monetary system, usually it contains the National Treasury, the mint where the notes are being printed. The Central bank and the commercial banks regulate the money supply in the economy of a country.
In periods when home prices declined substantially, some homeowners blamed the Central
bank. In other periods when home prices increased, homeowners gave credit to the Central
bank. How can the Central bank have such a large impact on home prices? How could
news of a substantial increase in the general inflation level affect the Central bank’s
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