Exam code: 0455 & 0987
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Define monetary policy.
Monetary policy is the process by which a country's central bank adjusts the money supply to influence total (aggregate) demand.
The is responsible for setting monetary policy in each economy.
The central bank is responsible for setting monetary policy in each economy.
What happens to borrowing and spending when the central bank lowers interest rates?
When the central bank lowers interest rates, borrowing becomes cheaper and spending and investment are encouraged, which can boost economic growth.
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Define monetary policy.
Monetary policy is the process by which a country's central bank adjusts the money supply to influence total (aggregate) demand.
The is responsible for setting monetary policy in each economy.
The central bank is responsible for setting monetary policy in each economy.
What happens to borrowing and spending when the central bank lowers interest rates?
When the central bank lowers interest rates, borrowing becomes cheaper and spending and investment are encouraged, which can boost economic growth.
True or False?
Higher interest rates tend to slow inflation by reducing total demand.
True.
Higher interest rates make borrowing more expensive, which reduces spending and total demand, helping to slow inflation.
Define quantitative easing.
Quantitative easing is a form of monetary policy where the central bank increases the money supply by purchasing financial assets (government bonds) to encourage lending and investment.
How can a lower exchange rate affect exports and imports?
A lower exchange rate makes exports cheaper for foreign buyers and imports more expensive, which can boost demand for domestic goods and improve the balance of payments.
Total (aggregate) demand = + firms' investment (I) + government spending (G) + exports (X) - imports (M)
Total (aggregate) demand = household consumption (C) + firms' investment (I) + government spending (G) + exports (X) - imports (M)
Which macroeconomic aim can be supported by low-interest loans for green projects?
Low-interest loans for green projects can support the macroeconomic aim of sustainability.
When the central bank increases interest rates, becomes more expensive for households, reducing discretionary income.
When the central bank increases interest rates, loan repayments becomes more expensive for households, reducing discretionary income.
What is the effect of expansionary monetary policy on unemployment?
Expansionary monetary policy can lead to a reduction in unemployment as increased demand encourages firms to hire more workers.
Define interest rate.
An interest rate is the cost of borrowing money or the reward for saving, usually expressed as a percentage of the amount borrowed or saved.
True or False?
A higher exchange rate always helps achieve economic growth.
False.
A higher exchange rate can make exports less competitive and may reduce economic growth, although it does help reduce inflation.
Quantitative easing by a central bank usually leads to increased and .
Quantitative easing by a central bank usually leads to increased consumption and investment.