Chapter 6 Flashcards
What are some direct controls the central bank can use?
- Setting minimum liquid reserve ratios
- Setting interest rate ceilings for bank deposits
- Issuing directives regarding the types of lending to be undertaken
What is quantitative easing?
- Monetary policy
- Increase in money supply
- Crediting
- “Ex nihilo”
- “Open market operations”
What is forward guidance?
- Absence of unforeseen events
- Monetary policy
- Over 18 to 24 months
- Reduces uncertainty
What are the advantages of financial intermediaries?
- Pool the resources
- Lend considerable sums
- Diversification
- Expertise
- Economies of scale
What are the disadvantages of financial intermediaries?
- Cost
- Requirements
- Inflexible
- Control
Monetary policy
The control of some measures of the money supply and/or the level and structure of interest rates
Fiscal policy
Decisions on the level and structure of taxation and government expenditure and hence, by implication, the public sector borrowing requirement (or debt repayment)
National debt management policy
Manipulation
Outstanding stock
Government debt
Level
Exchange rate policy
Target
Domestic currency
Trading
Prices and incomes policy
Aimed at influencing the rates of wage and price inflation
Taxation policy
Policy regarding taxation, its overall level, and distribution between personal direct, indirect, corporate, and other (eg stamp duty) will affect demand for goods and services, including labor, because of the impact on the prices
Competition policy
Competition policy will be a crucial element of the operating environment, especially for the naturally oligopolistic industries, such as utilities
Labor policy
Background
Flexibility
Bargaining power
Cost
