Political Economy Keynesian Economics Questions
In Keynesian Economics, the central bank plays a crucial role in managing the economy. Its primary role is to control the money supply and interest rates to influence aggregate demand and stabilize the economy. The central bank implements monetary policy by adjusting the interest rates and buying or selling government securities in the open market. By lowering interest rates and increasing the money supply during periods of economic downturn, the central bank aims to stimulate investment, consumption, and overall economic activity. Conversely, during periods of inflation or excessive economic growth, the central bank may raise interest rates and reduce the money supply to curb inflationary pressures. Overall, the central bank's role in Keynesian Economics is to actively manage monetary policy to promote full employment, price stability, and economic growth.