Question

What nonconventional monetary policies shift the aggregate demand curve, and how do they work?

Short answer

Actual interest rates and credit score gaps are reduced as a result of nonconventional monetary policies.

Step-by-step solution

Concept Introduction

Nonconventional monetary policies aim to increase the value and supply of foreign capital to economic and non-financial organizations.

Investment interest rates are determined by economic internal conflicts and tight interest rates set by the central bank.

Explanation

Privately issued securities are bought in nonconventional monetary policy, which reduces the credit gap and economic tension; however, when private assets are purchased by the central banking system, the price of the securities rises. This increase in the cost of securities lowers interest rates, lowering monetary friction and credit gap, which lowers actual-interest rates for investments. The lower actual interest rate for investment causes a rightward shift in the aggregate demand curve, which causes both increased inflation and output.

Final answer

As a result of the nonconventional monetary policy, actual interest rates and credit gaps have decreased.