00:01
All right, here we have that a central bank who wishes to operate a tighter monetary policy.
00:06
So if they want to have a tight money policy, right? come on, computer, a tight monetary policy.
00:13
What might they do? tight monetary policy.
00:17
Well, let's kind of go through each of these in turn.
00:22
All right, number a, lower interest rates to encourage spending and discourage saving.
00:28
Now, that does usually encourage spending and borrowing.
00:32
But that is not going to be a tighter monetary policy because that normally increases spending.
00:40
Increasing increases spending.
00:43
So number a is not correct.
00:46
Let's look at number b.
00:48
Reducing interest rates.
00:50
Right.
00:51
To reduce interest rates, but use open market operations so as to reduce the money supply...