How do the policies affect Government objectives? 2

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Monetary Policy- Reduced interest rates.

  • A fall in IR causes an increase in consumer spending as mortgages/credit cards are less expensive.
  • People will be keener to borrow to fund spending.-people have more DI to spend on spending.
  • Consumers will save less as theres a fall in IR, so spending will rise.
  • Firms will now invest more as less expensive to borrow, they will also want to save profits less and consumption has also risen.
  • A fall in IR reduces the value of £, SO imports are more costly exports are cheaper.
  • This all causes AD (total demand) in economy, causing output to grow and economic growth to rise.
  •  This increases employment but if too high, AD will rise causing

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