7 questions on "Monetary Policy and Aggregate demand - monetary policy in practice"
- Interest rate on other assets and loans
- asset prices
- market expectations
- the exchange rate
- The interest rate on other assets and loans falls
- the fall on interest rates makes borrowing less expensive,
- and encourages firms and households to borrow more money
- resulting in an increase in both consumption and investment spending
asset prices such as homes stocks bonds will increase
households increase their spending on final goods and services
- A fall in canadian interest rate will make canadian assets less attractive to investors.
- foriegn investory will buy fewer canadian assets, while canadian investors will buy more foreign assets
- the rise in net foreign investment will result in the depreciation of currency in the foreign exchange market
- a weaker currency makes domestic goods become less expensive and simulates our net exports
- When the central bank lowers the target for the overnight rate
- people would expect the inflation rate to rise in the future
- a higher inflation rate in the future would lead to an increase in interest rates wages.
- when the central bank lowers the target overnight rate
- this increases the money supply
- which in turn increases consumption investment and net exports
- this increase in the money supply shifts the AD curve towards the right.
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