There is a recession in USA. The Central Bank Governor wants to assist the government in getting the economy out of this recession. What should he do to fix this problem?

i) What policy tools are available to the central bank to combat the recession?
ii). Explain in which direction each of the tools of monetary policy have to change to combat the recession? iii). How will the central bank change these tools?
iiii) Explain how do changes in central bank monetary policy tools get transmitted to AD - {Hint use the AD equation) and eventually to fixing the recession.

Q2: Discuss monetary vs interest rate targeting?

Q3: What's the money multiplier? Explain this concept verbally first and then using an example with numbers.

Answer rating: 100% (QA)

1 The US central bank the Federal Reserve has a dual mandate to work to achieve low unemployment and to maintain stable prices throughout the economy ... View the full answer