Unit3-part2--Financial Markets MT481

Unit3-part2--Financial Markets MT481 - Financial Markets...

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Financial Markets MT481 Chapter 5: Question and Application ; 3,4,5 and 6 Pg. 117 -118 Monetary Policy 3. Choice of Monetary Policy When does the Fed use a loose-money policy, and when does it use a tight money policy? What is a criticism of a loose-money policy? What is the risk of using a monetary policy that is too tight? Response: The FED has to have many meetings in discussing the policy that will be used and how relaxed and what meaning of relaxed is in that time. Loose Money Policy may result in higher inflation but more people can obtain loans this lose method is also known as expansionary this is usually used to expand economic growth. The tight money policy is less money to be lent out and higher interest rates this controls inflation, but we risk slow movement anyway in the economy and still possibly face inflation. 4. Active Monetary Policy Describe an active monetary policy This type of policy is the one we recently used where the government moved quickly to decrease rates and push bank to give out more loans in return for higher reserves. 5. Passive Monetary Policy Describe a passive monetary policy.
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Unit3-part2--Financial Markets MT481 - Financial Markets...

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