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How can targeting interest rates result in inflation sprialing out of control?
Wiki User
∙ 15y ago
It could cause a kind of rubber-band effect on inflation. For instance, if the market is trying to keep interest rates high and the fed keeps dumping money into the market to try to keep interest rates low, one of these forces has to give. The market is going to be suddenly flushed with cash and risks an event that causes what would normally be a natural decrease in interest rates. This would cause a huge interest rate fluctuation and subsequent inflation.
Wiki User
∙ 15y ago
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How does a contractionary monetary policy affect the interest rate overall price level and GDP?
in contractionary monetary policy state bank of Pakistan control the overall price level in the country by increasing or decreasing the interest rate in the country. if inflation increase the SBP control it by increasing the interest rate.because if interest rate increase then people save more and consume less so overall supply of money decrease and inflating control and viceversa.
What are economics concern with?
The economy - increase and stabilization of growth -keeping inflation under control -adjusting interest rates to enable consumers to borrow and spend A+LS: how well resources are used by a society
When your country is experiencing inflation the government may try to control it by?
Yes government tries to control the inflation by increasing the supply into the market, this balances the demand supply curve
Keynesian solution to rising inflation?
to control inflation govt takes necessary steps 1 control high prices 2 issue low level of currerncy
What is walking inflation?
Walking inflation: When the price rise is moderate (is in the range of 3 to 7 %) and the annual inflation rate is of a single digit, it is called walking inflation. It is a warning signal for the government to control it before it turns into running inflation.
What are the objectives of price control in nigeria?
to control inflation
How does a contractionary monetary policy affect the interest rate overall price level and GDP?
in contractionary monetary policy state bank of Pakistan control the overall price level in the country by increasing or decreasing the interest rate in the country. if inflation increase the SBP control it by increasing the interest rate.because if interest rate increase then people save more and consume less so overall supply of money decrease and inflating control and viceversa.
What is the range of hyper inflation?
Hyperinflation is an extremely rapid or out of control inflation and there is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless.
What is Sales planning and control?
it involves prospecting , communicating and targeting our sales !
What are economics concern with?
The economy - increase and stabilization of growth -keeping inflation under control -adjusting interest rates to enable consumers to borrow and spend A+LS: how well resources are used by a society
When your country is experiencing inflation the government may try to control it by?
Yes government tries to control the inflation by increasing the supply into the market, this balances the demand supply curve
Keynesian solution to rising inflation?
to control inflation govt takes necessary steps 1 control high prices 2 issue low level of currerncy
What is walking inflation?
Walking inflation: When the price rise is moderate (is in the range of 3 to 7 %) and the annual inflation rate is of a single digit, it is called walking inflation. It is a warning signal for the government to control it before it turns into running inflation.
How does Brazil control inflation?
by controlling growth of money supply
Are those costs which firm has no control?
Costs which are affected by inflation
When using fiscal policy the government will do just the opposite to control inflation than it does to control?
recession..A+
Why would the federal reserve enact a tight money policy?
monetary policy is the use of money supply and interest rate to control the supply of money in an economy. Usually, the main use of monetary policy is to control inflation. e.g. when interest rate is high, people don't spend as much (and some may even save more), reducing the pressure on demand/supply, reducing the price level i.e. decreased inflation. It can work on reverse if the interest rate is put up (if inflation is dangerously low - close to point of deflation.) Alternatively, government can sell/buy assets so as to withdraw/inject more money into an economy.
