When a central bank changes it's target interest rate, any value of the interest rate chosen by the central bank implies a specific value for ______.

Question

Quizplus · Accepted Answer

When a central bank changes its target interest rate, it implies a specific value for the money supply. The central bank controls the money supply through its monetary policy operations, and by adjusting the target interest rate, it influences the amount of money circulating in the economy. Lowering the target interest rate typically increases the money supply by making borrowing cheaper, while raising the rate tends to decrease the money supply by making borrowing more expensive.

When a Central Bank Changes It's Target Interest Rate, Any