Macroeconomic Policy Revision - Monetary Policy

Following up from my fiscal policy revision notes, these are notes I made on monetary policy.  Again, apologies for the last diagram - I couldn't find it anywhere on the internet so had to make half of it in Paint... :P I think these notes are fairly comprehensive but please say something if you think of anything that could be added.

Hope they help!

~James

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  • Created by: origen5
  • Created on: 02-04-15 18:12

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Macroeconomic Policy Revison Notes - Monetary Policy

Definition: Managing the economy via the use of interest rates and the money supply.

Framework: Government sets the target for monetary policy to achieve in terms of inflation rate (currently
2.0% CPI +/- 1.0%). The Bank of England's Monetary Policy Committee (MPC) has…

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Drawbacks of Monetary Policy

1) Significant Time Lags: - The monetary policy 'transmission mechanism' means it takes 18-24 months for
effects of the policy change to be felt in the economy.

2) 'Blunt' Policy Type: - Unlike fiscal policy, monetary policy cannot be used to target specific problems
within an…

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