Monetary Policy Flashcards
What has caused fiscal policy to become less in the last 40 years
Inflation
What has monetary policy been the main policy for
Managing level and rate of the growth of aggregate demand and inflationary pressures
What us the bank of England responsible for
Providing monetary and financial stability in the uk
What was set up in 1977
Monetary policy committee
What do the monetary policy committee do
They set interest rates for the economy consistent with the need to meet the inflation target of 2% set by the government
What do the mpc have to consider when raising or lowering interest rates
Maintaining economic growth and inflation is allowed to be 1%-3%
When do the mpc
Once a month
How many people are on the mpc committee
9
What do they actually do in each meeting
Look at huge amounts of information on the state of the economy because the interest rate is set two years in advance
What are the factors the mpc consider
Consumer expenditure
Housing and financial markets
Exchange rates
What happens if the mpc believes inflation may rise
Raise interest rates
Why do firms consider when deciding whether to invest
Actual and expected level of interest rates
Disadvantages of a rise in interest rates
May damage business confidence
Less investment
Strong currency
Imports cheaper
What are lower interest rates designed for
To increase boost consumer and business confidence
