Monetary policy affects the money supply and interest rates from "summary" of Basic Economics by Thomas Sowell
Monetary policy plays a crucial role in shaping the money supply and interest rates within an economy. By adjusting the money supply, central banks can influence the overall level of economic activity. When central banks increase the money supply, they inject more funds into the economy, which can lead to lower interest rates. Conversely, when central banks decrease the money supply, they can raise interest rates. Interest rates are a crucial factor in determining the cost of borrowing money. Lower interest rates can stimulate consumer spending and business investment, as borrowing becomes more affordable. This, in turn, can boost economic growth. On the other hand, higher interest rates can discourage borrowing and spending, which may help to control inflation by reducing aggregate demand. ...
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