Money, Banking and the Macroeconomy 1. Using the 3-equation model for the banking system, a. explain...

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Money, Banking and the Macroeconomy 1. Using the 3-equation model for the banking system, a. explain how the central bank considers the lending rate in setting the policy rate. 2. 3. b. explain the adjustment process by the central bank when there is a shock to the banking system where bank view loans now as being riskier. Explain the factors affecting the banking mark-up. Using the 3-equation model for the banking system, explain the central bank strategy to achieve its targeted levels of inflation and output when there is an increase in investment that alter the lending rate in the banking system. Money, Banking and the Macroeconomy 1. Using the 3-equation model for the banking system, a. explain how the central bank considers the lending rate in setting the policy rate. 2. 3. b. explain the adjustment process by the central bank when there is a shock to the banking system where bank view loans now as being riskier. Explain the factors affecting the banking mark-up. Using the 3-equation model for the banking system, explain the central bank strategy to achieve its targeted levels of inflation and output when there is an increase in investment that alter the lending rate in the banking system.

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1a The central bank considers the lending rate in setting the policy rate because the lending rate is a key determinant of the cost of borrowing for b... View the full answer