In the New Keynesian model,the central bank achieves its interest rate target.

Question

Quizplus · Accepted Answer

In the New Keynesian model, the central bank achieves its interest rate target by supplying the quantity of money demanded at the target interest rate. This is done through open market operations, where the central bank buys or sells government securities to influence the level of reserves in the banking system, and ultimately the interest rate. This process allows the central bank to control the short-term interest rate and achieve its target.

In the New Keynesian Model,the Central Bank Achieves Its Interest