Central Banks and Limitations of Monetary Policy
The central bank of any nation worldwide is responsible for managing the country’s monetary policy. They also often have the responsibility of maintaining price stability and inflation. Central banks need to have the significant qualities highlighted below to be more…
Tools of Monetary Policy
The three main tools central banks use to implement monetary policies are open market operations, the central bank’s policy rate, and reserve requirements. These tools affect aggregate demand through the supply of money, cost of money, and credit availability, respectively….
Roles and Objectives of Central Banks
Objectives of Central Banks The main objective of a central bank is to maintain price stability. Depending on the country, central banks might have other objectives, such as controlling inflation, unemployment, interest rates, or exchange rates. However, all these objectives…
Implementation of Fiscal Policy
Recall that fiscal policy refers to all the methods used by a government to influence the economy through tax rates and government expenditures. For example, a government may decide to reduce taxes. These moves should, in theory, stimulate the economy…
Tools of Fiscal Policy
The tools that governments use ton influence the economy can be divided into spending and revenue tools. Spending tools refer to the overall government spending while revenue tools refer to taxes collected by the government. Government Spending Tools Capital Expenditure…
Roles and Objectives of Fiscal Policy
Roles and Objectives of Fiscal Policies Fiscal policy affects the following three aspects of an economy. Fiscal Policy and Aggregate Demand The primary goal of fiscal policy is to control tehe economy of a given country by influencing the aggregate…
Macaulay Duration
Definition Macaulay duration was introduced in the previous learning objective. It provides an understanding of the bond’s sensitivity to interest rate fluctuations. At its core, Macaulay duration is the weighted average time until a bond’s cash flows are received. It…
Relationship among a Bond’s Holding Period, Macaulay Duration, and Investment Horizon
Holding Period Return (Horizon Yield) This represents the total return an investor anticipates from holding a bond over a specific duration. It’s influenced by the coupon payments received and any change in the bond’s price due to interest rate movements….
Sources of Return from Investing in a Fixed-rate Bond
Sources of Return Investors in fixed-rate bonds achieve returns through the following: Discount bonds feature a coupon rate below the current market rate, while premium bonds have a coupon rate above the market rate. Over time, the book value of…
Compare Monetary and Fiscal Policy
Fiscal Policy Fiscal policy refers to government decisions on taxation and spending. These decisions affect a number of factors in the economy, including: Governments’ actions have a huge impact on any economybecause of two major reasons: Compare monetary and fiscal…
