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The objective of monetary policy is to maintain economic stability. Economic growth and development of the country, including employment. Use of monetary policy, the Central Bank is trying to maintain the stability of prices. Through the volume level control system, so that monetary policy has a role in maintaining the stability of prices, which affect economic growth. In the short term impact of interest rate policies, which affect demand and activity. Shown in the image.Monetary policy affects the economy, which can break the economic activities that are affected as follows:The split between the impact on economic activity that is covered in this section and the impact on inflation, which is covered in the last section. To describe the process of monetary policy to affect the economy, it should be kept in mind that they are far from purely mechanical rubbing on their operations. Forecast about the outcome of the action policy, such as economic forecasts in General, often under uncertainty. The policy is decided on the basis of the best available information. When they realize that these are uncertain. In General, the short-term interest rate for the principal impacts total demand and activity shown in the graph, the graph shown on map 4 is a significant change in the trend for larger measures of demand in General has been preceded by a significant change in the level of interest rates should.Short range into pieces as an increase in the interest rate that is designed to restrain the inflation it has according to the contraction of demand. On the other hand. The reduction of the interest rate as much as a period of significant growth faster. In response to market development and inflationary pressures Monetary policy can influence demand and economic activity. We can specify multiple mechanisms through which these effects can occur, which are grouped according to the. 5 topics
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