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Sagot :
Altering the discount rate (B) can be considered to be a relatively weak tool of monetary policy.
Monetary policy is a set of tools made by a nation's central bank to promote sustainable economic growth through controlling the overall money supply available to the nation's bank, its consumers, and business. Monetary policy allows the central bank to control the amount of money supply in the market and economy.
Let's discuss every option we have.
Quantitative Easing or QE is a monetary policy where the central bank purchased as many as possible securities on the open market to achieve a desired outcome. Quantitative easing creates new bank reserves and providing bank with more liquidity. QE encourage bank to do more lending and investment. The central bank will implement QE when the economic growth of a country is stalled.
Altering the discount rate happens when the central bank decides to change the discount rate charge to the banks. Discount rate is the interest rate set by the central bank on loans extended by the central bank to other banks. However altering discount rate will not directly affect the money supply in the economy. Because the bank will only borrow money on discount rate from the central bank if they are unable to keep their reserve requirements after trying to borrow from other banks, which has lower interest rate than the discount rate.
Reserve requirements are the amount of cash that banks must keep on their account to ensure the banks' liquidity. Reserve requirements ensures that the bank is able to meet its liabilities in casse of sudden withdrawals. Reserve requirements will direcly affect the amount of lending the banks can provide to the market. This policy will affect the amount of money supply in the economy directly.
Reducing the money supply cannot be considered as a monetary policy tool. Reducing the money supply is one of the monetary policy objectives. The central bank may have 3 kind of objectives when making monetary policy:
- To increase the money supply to encourage more spending in the economy
- To decrease the money supply to decrease the inflation
- To maintain the money supply to avoid further raised or overinflation
Learn more about Monetary Policy here: https://brainly.com/question/28038989
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