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Monetary policy:

1. Refers to the government's use of spending and tax policies to influence various aspects of the economy

2. Refers to the government's or central bank's attempts to change the money supply to influence the quantity of money and credit in the economy

3. Refers to government use of new legislation to print additional money.

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Yusra Anees
Yusra AneesLv10
30 Dec 2020

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Related questions

Which statement best describes why a government's actions are important in macroeconomics?

1. Government controls industry through policy.
2. Government is both a consumer and a producer.
3. Government can use policy to influence the economy.

Ā 

Consider a small, open economy (Honduras) with perfectly mobile capital and a fixed exchange rate. The newly-elected government hopes to improve Honduran economic performance by stimulating business investment spending there. The government's adding tax incentives for businesses and easing various rules and regulations, in fact, allowing businesses to buy more equipment and build more factories and warehouses.

Describe what happens to each of the following and explain why:

a) Honduran exchange rate

b) imports to Honduras

c) exports from Honduras

d) Honduran money supply

e) Honduran capital account (KA)

f) consumption

g) investment

Evaluate whether each of the following statements is true or false. Explain your answer and provide a supporting rationale.

a. If the real money demand is greater than the real money supply, interest rates must rise to reach equilibrium in the money market as institutions sell bonds to obtain more money.

b. The federal government's control of the money supply, which influences interest rates, is the primary tool that policymakers use to impact the macro economy.

c. A decrease in the reserve requirement decreases the money supply because banks have fewer reserves.

d. The real money demand curve shows how households and businesses change their spending in response to changes in the interest rate.

e. Both an increase in the nominal money supply by the Federal Reserve and an increase in the price level will cause the real money supply curve to shift to the right.

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