Explain what types of policies a central bank can implement to reduce the interest rate. Graphically...

Explain what types of policies a central bank can implement to reduce the interest rate.
Graphically illustrate and explain what effect an increase in real income will have on the money market.
Use the money market to answer this question. Suppose there is a reduction in income. First, briefly explain what effect this will have on the interest rate. Second, explain all types of policies the central bank could implement to prevent this reduction in income from affecting the interest rate.
Can the central bank completely control the money multiplier? Why?

Expert Solution

Rahul Sunny answered 2 years ago

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