Which relationship is shown by the monetary policy reaction-00416
This subjective question is related to the book/course
vu cs201 Introduction to Programming.
It can also be found in
vu cs201 Mid Term Solved Past Paper No. 11.
Question 1: Which relationship is shown by the monetary policy reaction curve? What will be the change in monetary policy reaction curve if the given factors change?
a. An increase in the Central Bank's Inflation Target
b. An increase in the Long-run real interest rate
a. Increase in central bank's inflation target shifts the monetary policy reaction curve to right
b. Increase in long run real interest rate shifts the curve to left.
a. An increase in the Central Bank's Inflation Target
b. An increase in the Long-run real interest rate
Answer:
Monetary policy reaction curve gives a relationship between inflation and real interest rate. It is set so that when current inflation equals target inflation, real interest rate equals long run real interest rate.a. Increase in central bank's inflation target shifts the monetary policy reaction curve to right
b. Increase in long run real interest rate shifts the curve to left.
