Monetary Policy

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  • Created by: Nish
  • Created on: 26-05-13 12:21
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  • Monetary Policy
    • A policy aimed at affecting the total supply of money in an economy
    • Main objective: 2% Inflation
    • The use of interest rates to control aggregate demand
    • Currently 0.5% base rate
    • ^Base rate set by B of E
      • Levels of AD falls
        • Less inflation
    • Lending + Saving rates
      • Lending rate increases
        • Levels of AD falls
          • Less inflation
        • Mortgage replayments rises
          • Less money per pocket
      • Base rate reduced by B of E
        • Levels of AD Increases
          • Increase economic growth
          • Inflation rises
          • Demand for workers increases
        • More money per pocket
          • Levels of AD Increases
            • Increase economic growth
            • Inflation rises
            • Demand for workers increases

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