Policymakers who want to stabilize the economy must decide how
much to change the money supply, government spending, or taxes. Why is it
difficult for policymakers to choose the appropriate strength of their
actions? Which method do you think is better in the long run? Why?
Thank you for the opportunity to help you with your question!
1. (a) The Bank of Canada may not expand cash supply, But rather the opeople all in all will hold less money with them and store the surplus with the banks as they are withdrwable by utilizing ATMs. This menas banks will adequately have more request stores which will permit them to give more cash. in the event that needed by offering lower rate of premium, and the cash multiplier will begin working and the cash supply will get augmented with an expansionary impact on total interest, pay and business. The additional coin available for use will be consumed by demnand for money just as premium rate gioes down.
1(b).If the Bank of Cnada needs to balance out total interest by counterbalancing the expansionary impacts of ATM system development, it can do any one or a greater amount of the accompanying
things: raise the store proportion for the banks, mop of a money's piece/fluid cash by offering securities to the banks and other in the business sector and raising the rebate rate or premium rates on govt. bonds.
Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 30th, 2015
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