The primary function of the Bank of Utopia is to formulate and implement monetary policy directed...

The primary function of the Bank of Utopia is to formulate and implement monetary policy directed to the economic objective of achieving and maintain stability in the general level of prices. Do you think this statement constitutes a hierarchical or dual mandate for the conduct of monetary policy? (Note: justify your answer with an explanation).

Expert Solution

In this case the primary function of the Bank of Utopia Is to formulate and implement monetary policy directed to the economic objective of achieving and maintain stability in the general level of prices.

So this is statement constitutes hi radical or dual mandate for the conduct of monetary policy.

Monetary policy is basically the policy of quantitative and qualitative instruments which includes Bank rate, cash reserve ratio, statutory liquidity ratio, open market operation, repo rate, reverse repo rate.

It also include direct action, guide lines to the commercial banks.

Yes I'm in support of this statement that it constitutes a dual mandate for the conduct of monetary policy because for the establishment of price stability in the economy it is important to follow the quantitative and qualitative instruments according to the economic condition and all the instruments can only be effective when right instrument can be used at the right situation so it is truly said that the condition of economy is depends on The implementation of monetary policies in a right manner.

monetary policy is highly effective in comparison to the fiscal policies because only monetary policy can control quickly the situation of inflation and deflation in the economy and to maintain the price stability in a right manner.

Rahul Sunny answered 2 years ago

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