Answer to Question #286184 in Microeconomics for Lisisia

Question

a.     Discuss using the IS-LM framework, how President Uhuru’s tax cuts and Central bank’s expansionary monetary policy may steer the economy out of Recession caused by Covid-19. Ensure that you draw diagrams and discuss the long run effects too. b.    Answer True or False, then justify your response with practical economic examples:                                             

i.      Open Market Operations are more effective in a developing country like Kenya when compared with the Bank Rate Policy.                                                                          

Since Quantitative credit control instruments are more targeted and more objective, it is always advisable that they be applied at all times over the Selective instruments

Answer 1

The Central Bank's monetary policy comprises of choices and measures taken to guarantee that the supply of money in the economy is consistent with the state's growth and pricing objectives. The goal of monetary policy is to keep the economy's price level stable. The term "price stability" refers to the preservation of low and stable inflation. The goal of the Central Bank's monetary policy actions is to keep inflation low and stable over time, which is an indicator of stable prices.