Monetary Policy
- Created by: ViralJZ
- Created on: 18-05-15 19:12
Fullscreen
Definition - Monetary Policy concerns the decisions made by the government regarding monetary variables such as the money supply or the interest rate to manage the economy, stabilise it at full employment.
Analysis - Monetary Transmission Mechanism is the process by which a change in the bank rate affects ifnlation
1st Channel -
Interest Rates Increase (Official base rate)
Market Rates Increase (they follow interest rates)
Domestic Demand C + I + G Decreases (borrowing costs more and so people invest less)
Total Demand Decreases
Inflation Decreases
2nd Channel -
Interest Rates Increase…
Comments
No comments have yet been made