3.6 Monetary Policy Flashcards
1
Q
Monetary policy definition
A
A policy that aims to control the total supply
of money in the economy to try to achieve
the government’s economic objectives,
particularly price stability
2
Q
Economic growth
A
Interest rates decrease
Increased spending, output and employment
3
Q
Low unemployment
A
Interest rates decrease
Increased spending, output and employment
4
Q
Price stability
A
Interest rates increase
Reduced spending, more price stability
5
Q
A healthier balance of payments
A
Interest rates increase
Reduced spending, including on imports
6
Q
What happens when interest rates fall?
A
Borrowing by consumer’s rises Borrowing by firm’s rises Savings fall Asset prices (houses) rise Disposable incomes rise Exchange rate fall
7
Q
What happens when interest rates rise
A
Borrowing by consumer’s falls Borrowing by firm’s falls Savings rise Asset prices (houses) fall Disposable incomes fall Exchange rate rises
