Topic 4:

Question 1

Monetary policy:

Answer 1

Increasing or decreasing money supply to speed up or slow down the overall economy.

Question 2

Interest rates.

Answer 2

The price of borrowing.

Question 3

Expansionary monetary policy.

Answer 3

Stimulating the economic growth, by lowering interest rates. (Borrowing is cheaper)

Question 4

Contractionary monetary policy.

Answer 4

Slowing economy, controlling inflation by reducing the money supply and raising interest rates.

Question 5

Open Market Operations.

Answer 5

The Fed buys or sells the government bonds. Used to manage short term interest rates and money supply.

Question 6

Quantitive Easing.

Answer 6

Central banks buy up long term assets from banks. It is used infrequently as a last resort during economic downturns, involving a large scale asset buying.