Question

Need help answering these questions!!

1. What economic concept do you find most interesting in Macroeconomics?

2. Write one example of an event, something your read in the paper, something that someone said, something you saw on the news, etc. that made you think of an macroeconomic concept.

Your answers should be specific and thorough.

Answer 1

Answer - The implementation of the monetary policies by the central bank is an interesting topic.

Recently , in the newspaper it was a headline that the central bank has increased the repo rate and the CRR. This means that the government is trying to bring the inflation under control. If the government raises the repo rate , the short term borrowing capacity of the banks will be discouraged. Thus there will be lower liquidity in the market.

If the CRR is increased , banks will have to keep a greater portion of the money with the central bank as reserves. This will lead to the decrease in the money supply.

Hence both of these tools aimed to reduce the inflationary conditions in the economy.