00:02
Federal reserve federal reserve to a more restrictive restrictive monetary policy and utilize open market operations open market operations then effects on following effects on following like number one reserves available to bank.
00:52
So what is impact on this when it is happened.
00:57
So now in the more restrictive policy the fed would sell government securities.
01:03
They would sell government securities and reducing the reserves available to bank reduce the reserves which are available in banks now at second real interest rate real interest rates.
01:29
So with a more restrictive policy, where they into reducing the inflation and control economic growth to this typically lets to higher interest rate.
01:37
It can create higher interest rate as the cost of borrowing increase cost of borrowing increase and this is also adjusted inflation which adjust inflation.
02:01
Now at third household spending on household spending on consumer durables.
02:17
So higher interest rate resulting from a restrictive policy would increase borrowing cost for households.
02:26
This would we can say increase borrowing cost for consumer.
02:34
This was led to decrease in spending on consumer durable decrease in spending on consumer durable as individuals and households may postpone or reduce big ticket purchases.
02:53
Now on next effect, we need to discuss on exchange rate value of dollar.
03:05
So more restrictive monetary policy can make currency country currency more attractive to foreign investor country currency more attractive to foreign investor and exports.
03:47
So investors due to high interest rate...