Monetary policy Flashcards
1
Q
Monetary policy
A
Use of interest rates , money supply and exchange rates to manage aggregate demand in order to achieve macroeconomic objectives.
1
Q
Interest rates
A
The cost/reward of borrowing/saving money is expressed as a percentage of a loan.
2
Q
Money supply
A
The total amount of money in of a cental bank of a country
3
Q
Exchange rate
A
Price of one currency in terms of another currency
4
Q
Expansionary monetary policy
A
- Decrease interest rates
- Decrease exchamge rates
- Increase money supply
**All of which increase AD **
5
Q
Contractionary monetary policy
A
- Increase in interest rates
- Increase in exchange rates
- Decrease in money supply
All of which decrease AD
6
Q
Who carries out monetary policy
A
In most countries the monetary policy measures are carried out by the central bank on behalf of the government.
* UK - Bank of england
* US - Federal reserve
7
Q
A
