How Does Monetary Policy Influence Aggregate Demand
Central banks in various countries often reserve currency as the operating target, because the bank will need to change the commercial bank reserves, and then to influence the intermediate target and the ultimate goal, no matter what kind of policy tools banks need this operation.
Because commercial bank reserves fewer bank loans and investment ability is stronger, it will lead to an increase in money supply and derivative deposit, many scholars believe that reducing bank reserve currency markets mean monetary relaxation. Another aspect of the reserve increase of the market shows that monetary tightening.
However, due to endogenous variables as interest rates, reserve as financial indicators are often misleading central bank.
The monetary
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It describes the price level and quantity of output, a negative correlation between aggregate demand and price levels. The monetary policy influence aggregate demand due to a price level and liquidity. The impact of monetary policy on short-term aggregate supply Short-term aggregate supply is the cost of production, including the monetary value of labour, taxes, subsidies. These changes lead to short-term factors moving average breaking ball. Short-term decline in the price level and GDP growth curve to the right. The change in monetary policy is bound to involve the average short-term aggregate supply curve, when hyperinflation is a short-run aggregate supply curve will decline. National central banks require to adjust monetary
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