Question

Explain how a central bank action on an increase in the interest cash rate ripple through the economy and lead to the target policy goal.

Answer 1

Ang de la len Central bank use monetary policy to segulate flow of cash in the eco when economy is en all the central bank decrease economy policy rate And when there is inflatian (hights) central bank increase pelicy rate to curb extra supply of cash in the economy. interest when central bank increase interest rate in the economy due to this action loan to commercial bank from central bank. So cost for money is higher than previous late for commercial bank White commercial banks are free to set their own bebeest interest rates for borrowing, then they will also increase interest rates to borrower & commercial banko This effect cause costly loans to the markel and entrepeneulso inflation can be Controlled in economy to stabilize output of the economy.

of this tools are offenly used central bank's deve loping nations lo segulale or stabilize value currency for foreign exchange market. of their local cu nagrano costly, toam promo central, Bank Central Bank Commercial Bank Mterest gale . In these way policy by goal is achieved increasing mife rest rates interest rates for borrowers in economy Masket /economy to control targeted inflation within range of maximum output loans are costly Less circulation of wisseny