ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As the demand for money increases during a period of inflation, interest rates rise to compensate for the higher demand and to keep prices from rising further. Conversely, deflation will result in lower interest rates as the demand for money drops.

Detailed explanation-2: -Monetary policy involves the management of the money supply and interest rates by central banks. To stimulate a faltering economy, the central bank will cut interest rates, making it less expensive to borrow while increasing the money supply.

Detailed explanation-3: -When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.

Detailed explanation-4: -Lowering bank reserve limits. Open market operations (OMO) Lowering the target interest rate. Quantitative easing. Negative interest rates. Increasing government spending. Cutting tax rates.