Flashcards
10 ~ Monetary Policy
Cards in this deck (5)
- 1What is MP?manipulating the money supply in order to achieve economic objectives (NOT JUST IR)
- 2MP diagram for expansionary MP↓ir = ↑C, ↑I = PME = ↑AD
↓ir = ↑I = ↑SRAS
↓ir = ↑I = ↑LRAS
↓ir = ↓reward of saving, ↓cost of borrowing = ↑C,↑I = ↑AD = ↑GDP
↑QE/AP = ↑MS = ↑C,↑I = ↑AD = ↑GDP - 3What is bad about MP? (4)time lags (18 moths to 2 years)
magnitude (size of change has relative effect)
not ceteris paribus
↓ir may not get passed on to consumers - 4What is QE/AP?↑MS to stimulate AD
- 5How does QE/AP work?bank creates money
to buy bonds from firms (if they buy lots then ↑D = ↑P so there will be less interest)
this reduces ir (↓reward of saving and cost of borrowing)
leading businesses and people to borrow more
so they spend more and create jobs
to boost the economy
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- AS - Level Economics (Macroeconomics) Flashcards on 10 ~ Monetary Policy, created by Tara Pugal on 23/04/2016.
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- Tara Pugal
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