The macroeconomic context of interest rate determination attempts to explain the interactions of a change in monetary policy settings with changes in interest rates. The macroeconomic context of interest rate determination identifies three distinct effects of a change in monetary policy.

a) List the three effects

b) What do you understand by the term Open Market Operations? When would the Central Bank resort to these activities?

c) If the central bank eases its monetary policy settings, describe the expected interactions that should occur based on the three effects identified in part (a)