Question

In: Finance

What are the principal goals that central banks pursue as they work to carry out monetary...

What are the principal goals that central banks pursue as they work to carry out monetary policy?

Solutions

Expert Solution

Followings are the principal goals that central banks pursue as they work to carry out monetary policy;

1. Price stability;

Central bank aim to bring price stability in the economy through monetary policy. As we know that price stability is key for economic success that is why this is one of the key goal of the monetary policy.

2. Promote employment;

Central bank also aim to promote employment in the country through its’ monetary policy so that able candidates can get employment.

3. Promote long-term economic growth;

Every central bank want to bring long-term economic growth in the country and with the help of monetary policy central bank can fulfill this goal.

4. Stability in exchange rates;

Volatile exchange rates may negatively affect trade of the country hence central bank can bring stability in the exchange rates with the help of monetary policy.

5. Equilibrium in the balance of payments;

It is necessary that there should be an equilibrium in the balance of payments. If it is not then country may suffer with the deficit of forex reserve that is why central bank try to bring equilibrium in the balance of payments.

6. Moderate long-term interest rates;

Central bank also try to moderate long-term interest rates so that all economic activities can be moved smoothly and desired parties can get loans from the market easily at reasonable rates.


Related Solutions

what kind of monetary policy can central banks carry out in the case of deficits in...
what kind of monetary policy can central banks carry out in the case of deficits in capital account balance? Explain in detail how it affect the balance of payment.
To what extent are the principal goals of central bank monetary policy consistent or inconsistent with...
To what extent are the principal goals of central bank monetary policy consistent or inconsistent with each other? What does a central bank do when the goals it wishes to pursue directly conflict with each other?
5. Why do central banks and the Federal Reserve carry out contractive monetary policies in periods...
5. Why do central banks and the Federal Reserve carry out contractive monetary policies in periods of inflation? a. Briefly explain the quantity theory of money b. Explain why contractive monetary policies are carried out, using the quantity theory of money as the basis for your explanation. c. Explain what instruments a central bank or the Federal Reserve has to carry out contractive monetary policies, and what it has to do (raise or lower, buy or sell) in each case.
3. Why do central banks use monetary policy? What kind of monetary policy do central banks...
3. Why do central banks use monetary policy? What kind of monetary policy do central banks take when an economy is in recession? Name any two tools/activities by central banks to exercise the policy. How do these tools/activities help? Why don’t they always do that?
What are the tools of monetary control used by central banks, such as the Bank of...
What are the tools of monetary control used by central banks, such as the Bank of England, the European Central Bank? Why cannot central banks fully control the money supply If the central bank wants to increase the money supply with outright open-market operations, what does it do? pleae qicly
a. What are those monetary tools and how does the federal reserves or the central banks...
a. What are those monetary tools and how does the federal reserves or the central banks use its monetary tools in order to influence the economy? b. What do you think is going to happen to the economy as the results of changes in the currency?
How does the Fed pursue its economic goals? How may the tools of monetary policy affect...
How does the Fed pursue its economic goals? How may the tools of monetary policy affect securities prices?
Monetary authorities should tend to carry out active monetary policy in any policy making. This is...
Monetary authorities should tend to carry out active monetary policy in any policy making. This is because active monetary policy will quickly respond to economic conditions, both global and domestic, to control the stability of the domestic economy. In addition, taking a long time of monetary policy will have an impact on the economic crisis because there is no policy that can immediately handle changes in economic conditions. Discuss this!
Find out the goals of the agreement, the date established, the countries participating, and summarize principal...
Find out the goals of the agreement, the date established, the countries participating, and summarize principal points of the agreement regarding tariffs, intellectual property, foreign direct investment, and rules regulating environmental, health and safety, minimum wages, and child labor. Research two of the following examples of regional economic cooperation. In 3 paragraphs TPP (Trans Pacific Partnership) APEC (Asia-Pacific Economic Cooperation) Mercosur (Southern Common Market) ASEAN (Association of Southeast Asian Nations)
What are the main goals of Monetary policy?
What are the main goals of Monetary policy?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT