low interest rates bringing about a recovery from recession in an economy such as the UK

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  • the importance of low interest rates in bringing about a recovery from recession 
    • Intro
      • Definitions
        • Recession and recovery in terms of economic cycle
        • monetary policy and the use of interest rates
          • monetary policy transmission mechanism
            • AD
            • Exchange Rate
            • Asset Prices
            • Consumer/Business Confidence
    • Paragraph 3
      • Exchange rates
        • low interest rate
          • Hot money out-flows
            • people sell pounds
              • demand for pounds decrases
                • Depreciation of sterling exchange rate
      • Effect on trade
        • Exports more price competitive
          • (X-M) increases
            • AD increases
              • Stimulates economy out of recession
        • Imports less price competitive
          • (X-M) increases
            • AD increases
              • Stimulates economy out of recession
      • Evaluation
        • Most effective when exports have an absolute trade advantage
        • Hot money affects stability may impede recovery
    • Paragraph2
      • Asset Prices
        • low bank rate
          • Value of assets increase
      • Cheaper cost of borrowing
        • cost of buying assets is cheaper
          • Demand for assets increases
            • Price of assets and therefore value increases
      • positive wealth effect
        • Boost in AD
          • Stimulates economy out of recession
          • GRAPH
      • Evaluation
        • Impact depends on the extent to which bank rate is lowered
        • Time lags
    • Paragraph 4
      • Alternatives
        • Quantitive Easing
          • Explain Process
        • Supply side
          • short term demand side monetary leads to inflation
          • needed in order for long term recovery
          • education and training/ national minimum wage
          • GRAPH
    • Evaluation and conclusion
      • Limitations of consumer and business confidence
      • extent to which interest rates are allowed to fall
      • Time lags
      • Low interest rates may cause inflation and impede recovery
      • Monetary policy to be used in conduction with supplyside policy to bring about a stable sustainable recovery and growth


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