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Question 2 (a) Elaborate on the process taken by the central bank when conducting a contractionary...

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Accounting

Question 2 (a) Elaborate on the process taken by the centralbank when conducting a contractionary monetary policy. [15 marks](b) Based on your answer above, select an economic problem where acontractionary monetary policy would help eradicate and explainwhat happens. [13 marks]

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Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation Since inflation is a sign of an overheated economy the bank must slow economic growth It will raise interest rates to make lending more expensive It is also called restrictive monetary policy The Fed measures inflation using the core inflation rate Core inflation is yearoveryear price increases minus volatile food and oil prices The Consumer Price Index    See Answer
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Question 2 (a) Elaborate on the process taken by the centralbank when conducting a contractionary monetary policy. [15 marks](b) Based on your answer above, select an economic problem where acontractionary monetary policy would help eradicate and explainwhat happens. [13 marks]

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