If the Fed wants to raise nominal interest rates, it must sell bonds on the open market, which decreases the amount of money supply.
What is the nominal interest rate?
- The nominal interest rate is the interest rate that is calculated before taking inflation into account.
- It also refers to the interest rate stated in the loan agreement without taking compounding into account.
- In terms of inflation adjustment and compounding adjustment, the nominal interest rate is different from the real interest rate and effective interest rate.
- Nominal interest rates can be influenced by a wide range of factors, including the supply and demand for money, federal government activity, the central bank's monetary policies, and many more. Central banks utilize the short-term nominal interest rate as one of their tools for implementing monetary policy.
- In a recession, the nominal rate is lowered to stimulate the economy.
- The nominal rate increases when there is inflation.
If the Fed wants to raise nominal interest rates, it must sell bonds on the open market, which decreases the amount of money supply.
To know more about nominal interest rates, check out:
https://brainly.com/question/25816355
#SPJ4
