Looking for trustworthy answers? Westonci.ca is the ultimate Q&A platform where experts share their knowledge on various topics. Ask your questions and receive precise answers from experienced professionals across different disciplines. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform.
Sagot :
Answer:
By increasing the amount of money in the economy, the central bank encourages private consumption. Increasing the money supply also decreases the interest rate, which encourages lending and investment. The increase in consumption and investment leads to a higher aggregate demand.
Explanation:
It is important for policymakers to make credible announcements. If private agents (consumers and firms) believe that policymakers are committed to growing the economy, the agents will anticipate future prices to be higher than they would be otherwise. The private agents will then adjust their long-term plans accordingly, such as by taking out loans to invest in their business. But if the agents believe that the central bank’s actions are short-term, they will not alter their actions and the effect of the expansionary policy will be minimized.
Thanks for using our platform. We're always here to provide accurate and up-to-date answers to all your queries. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.