Chapter 27: Monetary policy

Question 1

Monetary policy

Answer 1

Decisions on the money supply, the rate of interest and the exchange rate taken to influence aggregate demand

Question 2

Foreign exchange rate

Answer 2

The price of one currency in terms of another currency or currencies

Question 3

Expansionary monetary policy

Answer 3

Increases in the money supply and/or cuts in the rate of interest designed to increase aggregate demand

Question 4

Contractionary monetary policy

Answer 4

Cuts in the money supply or growth of the money supply and/or rises in the rate of interest designed to reduce aggregate demand