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Suppose the country of Venus is facing an economic downturn during the pandemic period. The central bank of Venus decides to pursue an expansionary monetary
Suppose the country of Venus is facing an economic downturn during the pandemic period. The central bank of Venus decides to pursue an expansionary monetary policy. Based on the statement above, (i) Define economic downturn and explain how it relates to the business cycle. (4 marks) (ii) Define open market operation (OMO) and explain the type of OMO that would be chosen by the central bank of Venus. (6 marks) (iii) Discuss why the central bank prefers to choose open market operation instead of other tools to increase Venus's money supply
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