Answer to Question #111569 in Microeconomics for Kwezi

Question #111569
Monetary transmission mechanism means
1
Expert's answer
2020-04-27T07:37:26-0400

The overarching goal of a central bank is to maintain price stability.

Monetary transmission mechanism is the process whereby a central bank’s interest rate gets transmitted through the economy and ultimately affects the rate of increase of prices—that means, inflation.

Suppose that a central bank announces an increase in its official interest rate. The implementation of the policy may begin to work through the economy via four interrelated channels.

The central bank’s policy rate works through the economy via any one, and often all, of the following interconnected channels:

-         Short- term interest rates;

-         Changes in the values of key asset prices;

-         The exchange rate; and

-         The expectations of economic agents.


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
APPROVED BY CLIENTS