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    Monetary Tools / Policy: - Controlled by Central Bank

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    Florence Lapinig
    Central banks use three main monetary tools - reserve requirements, the discount rate, and open market operations - to control the money supply and influence macroeconomic outcomes like investment and aggregate demand. Monetary stimulus decreases interest rates and expands the money supply by lowering reserve requirements, discount rates, and buying bonds, while monetary restraint has the opposite effect of tightening the money supply by raising reserve requirements, discount rates, and selling bonds.

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    Monetary Tools / Policy: - Controlled by Central Bank

    Uploaded by

    Florence Lapinig
    45 views3 pages
    Central banks use three main monetary tools - reserve requirements, the discount rate, and open market operations - to control the money supply and influence macroeconomic outcomes like investment and aggregate demand. Monetary stimulus decreases interest rates and expands the money supply by lowering reserve requirements, discount rates, and buying bonds, while monetary restraint has the opposite effect of tightening the money supply by raising reserve requirements, discount rates, and selling bonds.

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    Monetary_Policy2.pdf

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    Central banks use three main monetary tools - reserve requirements, the discount rate, and open market operations - to control the money supply and influence macroeconomic outcomes like investment and aggregate demand. Monetary stimulus decreases interest rates and expands the money supply by lowering reserve requirements, discount rates, and buying bonds, while monetary restraint has the opposite effect of tightening the money supply by raising reserve requirements, discount rates, and selling bonds.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    45 views3 pages

    Monetary Tools / Policy: - Controlled by Central Bank

    Uploaded by

    Florence Lapinig
    Central banks use three main monetary tools - reserve requirements, the discount rate, and open market operations - to control the money supply and influence macroeconomic outcomes like investment and aggregate demand. Monetary stimulus decreases interest rates and expands the money supply by lowering reserve requirements, discount rates, and buying bonds, while monetary restraint has the opposite effect of tightening the money supply by raising reserve requirements, discount rates, and selling bonds.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Monetary Tools / Policy

    – Controlled by central Bank


    • Reserve Requirement
    • Discount Rate
    • Open Market Operation

    The use of money and credit controls to influence


    macroeconomics outcome
    Monetary Policy
    Monetary Monetary
    Stimulus Restraint
    Increase money supply Decrease money supply

    Reduction of Ir of Borrowing Higher of Ir of Borrowing

    Increase Investment Decrease Investment

    Increase Aggregate Demand Decrease Aggregate Demand


    Summary for Monetary Policy
    • Monetary Expansion/ Stimulus
    – Decrease RRR
    – Decrease Discount Rate
    – Buying of Bonds

    • Monetary Contraction/ Restraint


    – Increase RRR
    – Increase Discount Rate
    – Selling of Bonds

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