Monetary policy- MM

Question 1

What is monetary policy?

Answer 1

Intervention by the central bank to affect the money supply in the economy

Question 2

What is the main aim of monetary policy?

Answer 2

To ensure stable prices close to the target rate of inflation (2%)

Question 3

What is the secondary aim of monetary policy?

Answer 3

Influence levels of economic activity within a country

Question 4

What are 3 main tools of monetary policy?

Answer 4

1) Changing base rate of interest
2) Quantitative easing/tightening
3) Changing inflation base rate

Question 5

What are the two types of monetary policy?

Answer 5

1) Expansionary monetary policy
2) Contractionary monetary policy