23 Monetary Policy

Question 1

Monetary policy

Answer 1

Any policy tools that affect the price or quantity of money. It is the use of interest rates, money supply, credit regulations to influence aggregate demand(demand-side policy).

Question 2

Monetary policy tools are usually applied by

Answer 2

Central bank

Question 3

Interest rates

Answer 3

Price of borrowing money and the reward for saving. Central banks use this to control inflation and influence economic growth. Changes in interest rates have also been used to stabilize price.

Question 4

Money Supply

Answer 4

Total amount of money in a country

Question 5

Credit regulations

Answer 5

Rules affecting bank lending and maintaining financial stability imposed by the central bank.

Question 6

Expansionary monetary policy

Answer 6

Can be used to increase aggregate demand. Cutting interest rate, increasing money supply & reduction in restrictions in bank lending can increase aggregate demand.