Monetary Policies Flashcards
(4 cards)
1
Q
What does expansionary monetary policies do?
A
Acts to increase AD using:
A low interest rate
Less restrictions on the money supply
A weak exchange rate
Shifts AD to the right
2
Q
What is monetary policies?
A
Mainly involved setting interest rates - controlling the total amount of money in circulation and how expensive it would be borrowing money
3
Q
What is contractionary monetary policy?
A
Acts to reduce AD:
A high interest rate
A strong exchange rate
AD shifts left
4
Q
Is monetary policies effective?
A
No - low interest rates don’t always stimulate spending and investment - it depends on consumer confidence and whether it’s a recession or not
