Answer to Question #182909 in Macroeconomics for faisal

Question

how do you think monetary tightening policy change would affect nominal interest rate?

Answer 1

The effect would occur when the Central Bank tightens policy/makes money tight by raising short-term interest rates through policy changes to the discount rate, which is also referred to as the federal funds rate.Lifting interest rates increases the cost of borrowing and effectively reduces its attractiveness.