42) Monetary policy Flashcards
1
Q
What is monetary policy?
A
The manipulation of monetary variables that affect the flow of money around the economy
1) Money supply
2) Interest rate
3) Exchange rate
2
Q
How does the level of interest rates affect AD?
A
1) Loan repayments
2) Mortgage repayments
3) Wealth affects
4) Savings accounts
3
Q
How can a government affect exchange rates?
A
1) Buying and selling currency
2) Changing interest rates
4
Q
What is the UK’s inflation target?
A
2% +/- 1%
5
Q
Who’s responsibility is it to achieve the inflation target?
A
Bank of England
6
Q
What two monetary policies affect AD?
A
1) Expansionary monetary policy is any monetary policy aimed at boosting AD
2) Contractionary monetary policy is any monetary policy aimed at reducing AD
