Monetary Policy Flashcards
1
Q
What is monetary policy?
A
It involves changes in interest rates, the money supply and the exchange rate by the central bank in order to influence AD
2
Q
What is expansion monetary policy?
A
Policies to increase AD
3
Q
What is contractionary monetary policy?
A
Policies to reduce AD
4
Q
What happens when you increase AD?
A
Inflation increases
Growth increases
Reduces unemployment
5
Q
What happens when you reduce AD?
A
Inflation reduces
6
Q
What is the BOE primary role?
A
Keep inflation at around 2%
