Key Terms 12 - Financial Markets And Monetary Policy

Question 1

Money

Answer 1

Primarily a medium of exchange or means of payment, but also a store of value.

Question 2

Money Supply

Answer 2

The stock of financial assets which function as money.

Question 3

Central Bank

Answer 3

A national bank that provides financial and banking services for its country’s government and banking system, as well as implementing the government’s monetary policy and issuing currency. The Bank of England is the UK’s central bank.

Question 4

Monetary Policy Comittee

Answer 4

The part of the Bank of England which implements UK monetary policy. The UK government sets the monetary policy objectives or targets, currently at 2% CPI inflation rate target, with the MPC then implementing monetary policy to try to ‘hit’ the target(s).

Question 5

Bank Rate

Answer 5

The rate of interest that the Bank of England pays to commercial banks on their deposits held at the Bank of England.

Question 6

Contractionary Monetary Policy

Answer 6

Uses higher interest rates to decrease aggregate demand and to shift the AD curve to the left.

Question 7

Exchange Rate

Answer 7

The external price of a currency, usually measured against another currency.