THE ECONOMIC ENVIRONMENT - MONETARY POLICY

Question 1

What is monetary control

Answer 1

Monetary policy involves managing the supply of money in order to influence the economy

Question 2

How many macro economic objectives does the government have

Answer 2

Four:

Economic growth
Full employment
Price stability
Balance of payments

Question 3

What are the 3 tools the government can use to achieve the macro economic objectives

Answer 3

Fiscal

monetary policy

Supply side policies

Question 4

What are the opportunities and threats of falling interest rates

Answer 4

Opportunites:

Should increase consumer confidence and spending, so opportunities to expand

Review product portfolio. Are there enough income elastic products

Opportunities to increase gearing and expand

Impact on exchange reate could lead to export opportunities

Threats:

Increases in competition

Consumers take on too much debt

Question 5

What are the oportunities and threats of rising interest rates

Answer 5

Opportunities:

Increase number of ‘inferior goods’ in product portfolio

Targt savers rather than borrowers I.E. older gereration

Threats:

Falling business and consumer confidence

Rising exchange rate damages export sales

Question 6

READ OVER THE DOCUMENT

Answer 6

https://docs.google.com/document/d/175kQKb_TcaTl3HGX9QHUAhfU-wabK9UPwlfD-P6-VHw/edit