Explain the time inconsistency problem and how it relates to the debate over rules versus discretionary policy. Describe how the time inconsistency problem is important for central bank behavior in terms of disinflationary policies.
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- List the three traditional tools that a central bank has for controlling the money supply.“Since financial crises can impart severe damage to theeconomy, a central bank’s primary goal should be toensure stability in financial markets.” Is this statementtrue, false, or uncertain? Explain.Explain the factors on which an independent central bank can havepositive impact and the factors on which it might create negativeimpact?
- How can forward guidance as a tool of the central bankimpact the policy instrument, intermediate targets, andgoals?In what sense can greater central bank independencemake the time-inconsistency problem worse?Explain in detail the process of Monetary Policy transmission of a decrease in the cashinterest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cashrate ripple through the economy and lead to the target policy goal. (Three connected diagramsshould be used: (1) money supply and demand (2) investment demand schedule (3) AS/ADdiagram. Interest rates is the variable that connects the first and second diagram).
- The Federal Reserve has raised the Federal Funds rate by 3.75 percent within the past year. Ifa bank had capital of 10 percent when the Fed began raising rates and has no loans at risk ofdefault, under what circumstances will its capital position be compromised? Please be specific.identify the expansionary monetary policy implemented y the central bank. and explain On Tuesday, the Central Bank, also in response to the covid19 precautions, lowered the repo rate to 3.5 percent and lowered the reserve requirement to 14 percent, in order to lower lending rates and increase liquidity in the financial system.Suppose the central bank is following a constantmoney-growth-rate rule and the economy is hit witha severe economic downturn. Use an aggregate supply and demand graph to show the possible effects onthe economy. How does this situation reflect on thecredibility of the central bank if it maintains the moneygrowth rule? How does it reflect on the central bank’scredibility if it abandons the money growth rule torespond to the downturn?
- William does not feel comfortable with the currentlevel of the European Central Bank’s independence.Put yourself in William’s shoes and state an argumentagainst the current level of the European Central Bank’sindependenceThe central bank of Trinidad and Tobago decides to pursue acontractionary monetary policy. Provide a table with the money supply data and inflationrate for Trinidad and Tobago for 2014 - 2019.Hi, can I get help with this question I'm not sure what to choose? I'm confused base on the graph and I'm not quite sure what statement is accurate. The graph is in the attachments with download data. Here's the question: Why is it important for the central bank to be independent from the part of the government responsible for spending? A. The Federal Reserve is, historically, driven by political ideologies. Allowing it to influence the rest of government could harm its ability to enact effective monetary policy. B. If not independent, the government might be tempted to have the central bank print more money (creating inflation) whenever the government runs a budget deficit. C. If not independent, the government might be tempted to have the central bank print more money (creating deflation) whenever the government runs a budget surplus.
