Question

Suppose that, in country of Wonderland, the inflation is at a relatively high level and its unemployment rate is at a historic low. At the same time, a low interest rate environment is spurring businesses to hire more workers and invest in new facilities.

1) Why might the central bank of Wonderland be worried about these developments?

2) Given the circumstances, what would countercyclical monetary policy seek to accomplish? Explain at least two mechanisms that the central bank can use to implement this policy.

3) Based on your answers to part 1) and 2), do you think this countercyclical policy would be enacted if central bankers were appointed by popular vote? What would happen if they were political appointees that could be hired and fired by the President of Wonderland? Explain.

Answer 1

Answer :-

Given that,

in country of Wonderland,

the inflation is at a relatively high level and its unemployment rate is at a historic low.

At the same time, a low interest rate environment is spurring businesses to hire more workers and invest in new facilities.

1)Here we need to discuss Why might the central bank of Wonderland be worried about these developments

Because of  a low interest rate environment is spurring businesses to hire more workers and invest in new facilities.Then, Banks do not have any benefit while low interest rate environment if having high interest rate then bank satisfies with these profits.

2) Here we need to discuss what would countercyclical monetary policy seek to accomplish? Explain at least two mechanisms that the central bank can use to implement this policy.

At the point when the Fed sees monetary movement to be winding down, it endeavors to support yield and work by expanding the flexibly of cash, along these lines squeezing loan fees and invigorating development in such premium delicate areas

(1) Inflation is at a relatively high level and thet undergoes the procurement made by the contemperary terms which includes all the necessary steps not to occur inflation policy to seek and implement for the accurate and development conditions to attain the possible terms to incidence certain point tocaluculate actual terms and their availability to attain all the possible conditions to prolong the customers and clients to the banks that attains the succesful dealings with the banks and their considerations.

(2) Inflation is at a relatively high level and its unemployment rate is at a historic low then the accurance of the possible conditions to develop all the accessories where inflation is highly and it accumilates inflation rate to retreat and decline all the possible interms behalf of developing container to recreate all the possible ways to create all the possible ways to create high rate of expansion.

3)Here we need to explain What would happen if they were political appointees that could be hired and fired by the President of Wonderland

A domino impact follows, where expanded joblessness prompts a drop in purchaser spending, easing back development significantly further, which powers organizations to lay off more specialists political appointees that could be hired and fired by the President of Wonderland can easily apeal unemployment

Thank you