Interest Rates and Monetary Policy

timer Asked: Jan 5th, 2018
account_balance_wallet $30

Question description

  • How is the equilibrium interest rate determined in the market for money?
  • What are the goals and tools of monetary policy?

Could you touch on this subject as well: However, considering, for instance the open market operation, you have not show under what conditions the Fed buys/sells securities. In addition, a new tool had been introduced in recent years. It is called the Term Auction Facility. Would you elaborate on it.

A minimum 600 word response for these two questions.

Tutor Answer

School: Cornell University

Hi buddy,Am facing some technical challenges, please add me some four more hours. Regards
Hi buddy,Here you go,Please go through it and let me know if you need any revision. Feel free to invite me for more questions.Nice time buddy.Regards

Surname 1
Interest Rate and Monetary Policy
Equilibrium Interest Rate
The equilibrium interest rate is achieved when the demand for a particular amount of
money equals the supply of money. Moreover, changes in the economy and monetary policy
affect the equilibrium interest rate; when income, both corporate and personal increases, there is
demand for money and therefore the Federal Reserve increases the amount of money in the
economy (McConnell, Brue, and Flynn 102). Inflation has the same effect on the equilibrium as
it results in an increase in the money circulating in the economy. This is for the reason that the

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