Monetary Policy Flashcards
Monetary policy definition
Actions taken (such as changing interest rates and the money supply) to achieve price stability and confidence in the currency
Central bank definition
A government institution (usually independent) that manages a country’s money supply and interests rates e.g. Bank of England
Lender of last resort definition
A central bank is usually legally obliged to provide loans to eligible institutions if, due to financial difficulties, they are not able to cover their liabilities i.e meet demands for cash from its creditors.
Money supply definition
The entire stock of money and other liquid instruments at any point in time
Bank rate definition
The rate the Bank of England charges other banks on 24 hour loans.
Interest rate definition
The price of money - used to determine the return on saving and the cost of borrowing money
Exchange rate definition
The rate at which one currency can be exchanged for another currency
