unit 9 key words

Question 1

policy instrument

Answer 1

tool/tools used to attempt policy objective achievement

Question 2

bank of England

Answer 2

central bank of UK economy

in charge in monetary policy

Question 3

central bank

Answer 3

controls banking system

implements monetary policy on behalf of government

Question 4

money

Answer 4

asset
medium of exchange
used to buy things

Question 5

inflation rate target

Answer 5

CPI inflation target rate
set by government & bank of England
2% currently

Question 6

monetary policy committee (MPC)

Answer 6

9 economists
chaired by governor of bank of England
set bank rate, key interest rate, decide changes to monetary policy

Question 7

bank rate

Answer 7

interest rate for the bank of England
paid to commercial banks
on deposits

Question 8

liquidity

Answer 8

measures the ease in which an asset can be turned into cash without a loss in value
cash is the most liquid

Question 9

money supply

Answer 9

stock on money in the economy

made up of cash and bank deposits

Question 10

contradictory monetary policy

Answer 10

uses higher interest rates
decreases AD
AD curve shifts left

Question 11

exchange rate

Answer 11

value price of one currency in terms of another

Question 12

expansionary monetary policy

Answer 12

lower interest rates
increase AD
AD curve shift right

Question 13

tax policy

Answer 13

tax, consumer spending, government budgetary positioning

achieve policy objectives

Question 14

budget deficit

Answer 14

government spending exceeds government revenue (tax)
G > T
expansionary

Question 15

balance budget

Answer 15

achcieved