Explanation Central Bank typically influences the monetary policy in the economy and the six potential goals that the monetary policymakers are likely to pursue are listed as follows: The Price Stability Goal: Growing price volatility is a threat to a growing economy, and hence the monetary policymakers prioritize to bring stability in the economy. The associated social and economic costs with inflation are essential as they help the consumers and investors to make informed decisions. Further, it also encourages investment from other countries. Policy makers may use the nominal anchor to ensure price stability in the economy. High employment (output stability): High employment rates ensure higher economic growth . Unemployment causes a ripple effect in the economy, as it leaves less income with the consumers, which further results in the less consumption of goods and services. Due to the low demand of goods and services, the firms generate revenue and are forced to lay-off more employees. Therefore, it is essential that policymakers maintain high employment rates. Economic Growth: Maintaining economic growth is important to ensure high national income and output and thus create an increase in the total expenditure. Economic growth helps to improve the living standards and results in greater consumption of goods and services...

Pearson eText Economics of Money, Banking and Financial Markets, The, Business School Edition -- Instant Access (Pearson+)

5th Edition

ISBN: 9780136879381

Author: Frederic Mishkin

Publisher: PEARSON+

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Monetary Policy and Equation of Exchange

The monetary policy has been defined as the policy that is used by the Federal Reserve (the central bank of the US) or the central bank (the central bank of India is RBI) along with the use of the supply of money to accomplish certain macroeconomic polic…

Monetary Economics

As from the name, it is very evident that monetary economics deals with the monetary theory of economics. Therefore, we can say that monetary economics, is that part of economics that provides us with the idea or notion of analyzing money as a holding wi…

Question

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

Chapter 19, Problem 2LO

To determine

The six potential goals that monetary policymakers pursue

Concept Introduction:

Monetary Policy: Monetary policy is the action undertaken by the monetary authority of the country, typically a central bank to control the money supply (liquidity) and interest rates to manage the macroeconomic variables influencing the economy, such as inflation, consumption, and growth.

Nominal Anchor: A nominal anchor is a single variable or a device that is used by the Central bank to influence the economy’s expectation of the nominal price level or about the course of action that can be undertaken by the Central Bank, and is generally used to ensure price stability

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Chapter 19 Solutions

Pearson eText Economics of Money, Banking and Financial Markets, The, Business School Edition -- Instant Access (Pearson+)

Ch. 19 - Prob. 1LO Ch. 19 - Prob. 2LO Ch. 19 - Prob. 3LO Ch. 19 - Prob. 4LO Ch. 19 - Prob. 5LO Ch. 19 - Prob. 6LO Ch. 19 - Prob. 7LO Ch. 19 - Prob. 8LO Ch. 19 - Prob. 9LO Ch. 19 - Prob. 1Q

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