Question

Whats is Norway's Monetary Policy? How does it relate or compare to the countries in the rest of the world?

Answer 1

Monetary policy of the country is expansionary, since it gradually lowering the interest rate. This is done because of lowering the inflation rate to 2.5% rate.

Expansionary monetary policy increases the supply of money in the market. It could be done by lowering the interest rate; because at low interest the borrowing amount would be high, which increases the money supply.

Comparison: Basically, countries having high inflation used to go for Contractionary monetary policy. This is just reserve of expansionary policy, where the interest rate becomes high. Inflation is the cause of high money flow in the economy; if people have excess money in their hands they used to spend more, creating inflation. Therefore, most of the countries in the world follow this rule and adopt contractionary monetary policy at high inflation. But the country N doesn’t follow it because of the observation; the government of the country observes that such high inflation is not because of high purchasing power of the people, rather it happens because of increasing oil price in the international market; factors of production become costly, which requires additional money flow.