Question: Q3 - Modules L7 and L8 . Monetary Policy Response to the Recent Negative Shock Central Banks around the world have responded to the pandemic

Q3 - Modules L7 and L8. Monetary Policy Response to the Recent Negative Shock

Central Banks around the world have responded to the pandemic by using expansionary monetary policy. They will probably need to aim for a higher level of inflation, as advanced capitalist economies attempt to recover from the negative shock, according to these articles:

https://www.abc.net.au/news/2020-08-28/us-central-bank-fed-landmark-policy-shift-on-inflation/12602362

https://theconversation.com/keating-is-right-the-reserve-bank-should-do-more-it-needs-to-aim-for-more-inflation-146393

How effective are reductions of nominal interest rates at stimulating domestic aggregate demand in a recession? In your answer, discuss the limitations of monetary policy and the problems of persistent low or negative inflation.

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