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    Central Bank MP

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    Windyee Tan
    This tutorial document discusses monetary policy and interest rates. It begins by explaining how central banks can affect interest rates through open market operations that increase or decrease the supply of loanable funds. It then discusses why central banks may pursue accommodative monetary policy to stimulate economic growth. The document also addresses how central banks can stimulate growth or fight inflation through interest rate adjustments. Finally, it explores how borrower and lender preferences for short-term versus long-term loans can impact long-term interest rates.

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    Central Bank MP

    Uploaded by

    Windyee Tan
    20 views13 pages
    This tutorial document discusses monetary policy and interest rates. It begins by explaining how central banks can affect interest rates through open market operations that increase or decrease the supply of loanable funds. It then discusses why central banks may pursue accommodative monetary policy to stimulate economic growth. The document also addresses how central banks can stimulate growth or fight inflation through interest rate adjustments. Finally, it explores how borrower and lender preferences for short-term versus long-term loans can impact long-term interest rates.

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    Central Bank MP

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    This tutorial document discusses monetary policy and interest rates. It begins by explaining how central banks can affect interest rates through open market operations that increase or decrease the supply of loanable funds. It then discusses why central banks may pursue accommodative monetary policy to stimulate economic growth. The document also addresses how central banks can stimulate growth or fight inflation through interest rate adjustments. Finally, it explores how borrower and lender preferences for short-term versus long-term loans can impact long-term interest rates.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    20 views13 pages

    Central Bank MP

    Uploaded by

    Windyee Tan
    This tutorial document discusses monetary policy and interest rates. It begins by explaining how central banks can affect interest rates through open market operations that increase or decrease the supply of loanable funds. It then discusses why central banks may pursue accommodative monetary policy to stimulate economic growth. The document also addresses how central banks can stimulate growth or fight inflation through interest rate adjustments. Finally, it explores how borrower and lender preferences for short-term versus long-term loans can impact long-term interest rates.

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    © All Rights Reserved
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    Flag for inappropriate content
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    Tutorial:

    Interest Rates and Monetary Policy

    GD20503
    Semester 1 2019/20
    Q1: How does it affect interest rates?
    Graphical ExplanaIon
    Interest rate D0 D1

    i1
    E1
    i0
    E0

    QuanIty of
    loanable funds
    Q2: Why does BNM maintain accommodaIve
    monetary policy to support growth?
    Graphical ExplanaIon
    Interest rate

    S0
    S1
    E0
    i0

    E1
    i1
    D0

    QuanIty of
    loanable funds
    Q3
    •  How does central bank sImulate economic
    growth?
    Graphical ExplanaIon
    Interest rate

    S0
    S1
    E0
    i0

    E1
    i1
    D0

    QuanIty of
    loanable funds
    Q4
    •  How does central bank fight high inflaIon?
    Graphical ExplanaIon
    Interest rate

    S1

    E1 S0
    i1
    E0
    i0
    D0

    QuanIty of
    loanable funds
    Q5
    Q5
    •  i. Do borrowers prefer to demand for short-
    term loanable funds?
    •  ii. Do Lenders prefer to supply long-term
    loanable funds?
    •  iii. How do i and ii affect the long term interest
    rates?
    Q5
    •  i. Do borrowers prefer to demand for short-
    term loanable funds? YES
    •  ii. Do Lenders prefer to supply long-term
    loanable funds? YES
    •  iii. How do i and ii affect the long term interest
    rates? Put downward pressure on the long
    term interest rates
    Graphical ExplanaIon
    Long term
    Interest rate

    S0
    S1
    E0
    i0

    E1
    i1
    D0

    D1

    QuanIty of
    loanable funds

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