Answer to Question #47668 in Macroeconomics for yuvi singh
what decision made by central bank. the action by bank ,money supply interest rate movement and the money multiplier.
This is done primarily through:
1. Increasing interest rates
2. Increasing reserve requirements
3. Reducing the money supply, directly or indirectly
This tool is used during high-growth periods of the business cycle, but does not have an immediate effect.
So, in our case this policy will be used. The central bank will increase interest rate, the other banks will increase interest rate for loans and deposits, money supply and money multiplier will decrease, causing decrease of total business activity.
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