Ch23 Monetary Policy

Front

What does monetary policy involve?

Back

Monetary policy involves the use of interest rates and changes to the money supply to influence the level of aggregate demand in the economy.

Front

What is an interest rate?

Back

An interest rate is the price charged for borrowing money and the reward for saving.

Front

What is the money supply?

Back

The money supply is the total amount of money in a country. Changes in the money supply affect aggregate demand.

Front

What are credit regulations?

Back

Credit regulations are imposed on commercial banks by the central bank to maintain financial stability and influence lending by the commercial banks.

Front

What is the role of a central bank in monetary policy?

Back

A central bank is usually responsible for applying monetary policy to meet the macroeconomic policy aims of the government.

Front

What is an expansionary monetary policy?

Back

An expansionary monetary policy is used to increase aggregate demand.

Front

What is a contractionary monetary policy?

Back

A contractionary monetary policy decreases aggregate demand.