Contrast the actions a central bank would take to increase the quantity of money in the...

Contrast the actions a central bank would take to increase the quantity of money in the economy with the actions it would take to produce the opposite effect.

Expert Solution

If imagine a nation’s economy were a human body, then its heart would be the central bank. The Central bank pumps money into the nation’s economy to keep it healthy and growing. The methods Central Banks use to control the equantity of money, depending on the country’s economic situation and the power of the Central Bank. Federal Reserve, European Central Bank, Swiss National Bank, Bank of England are the examples of Central Banks.

Actions a Central Bank would take to increase the quantity of money-

1. Central Banks can increase the amount of money.

2. Central Banks can control quantity of money in an economy be reserve requirement.

3. Central Bank has certain tools to push interest rates.

4. Engage in Open Market Operations.

5. Introduce a Quantitative Easing Program.

6. The Bottom Line

7. Free Stock Simulator.

Rahul Sunny answered 2 years ago

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