In an economic environment where the initial policy interest rate (ip) and the equilibrium interest rate...

 

Transcribed Image Text:

In an economic environment where the initial policy interest rate (ip) and the equilibrium interest rate (i.) are equal in the reserve market, the central bank plans to lower the required reserve ratios in order to recover from the economic recession. If this monetary policy measure is implemented, a. How a divergence occurs between the policy interest rate and the equilibrium interest rate? b. What kind of measure should the central bank take to keep the equilibrium and the policy interest rates equal? In an economic environment where the initial policy interest rate (ip) and the equilibrium interest rate (i.) are equal in the reserve market, the central bank plans to lower the required reserve ratios in order to recover from the economic recession. If this monetary policy measure is implemented, a. How a divergence occurs between the policy interest rate and the equilibrium interest rate? b. What kind of measure should the central bank take to keep the equilibrium and the policy interest rates equal?

Answer rating: 100% (QA)

If the central bank lowers the required reserve ratios this will increase the money supply in the ec... View the full answer