monetary policy

Question 1

What does monetary policy aim to do?

Answer 1

Influence the activities of the economy by using tools such as interest rates, exchange rates and the money supply.
The central bank plays an important role in implementing a country’s monetary policy. Therefore the monetary policy will always change when one of the influencing factors changes

Question 2

Monetary and fiscal policy are macroeconomic tools used to…

Answer 2

manage or stimulate the economy.

Question 3

What does monetary policy address

Answer 3

Monetary policy addresses interest rates and the supply of money in circulation

Question 4

What is monetary policy generally managed by

Answer 4

The central bank

Question 5

Monetary policies can either be?

Answer 5

contractionary or expansionary

Question 6

Implementing one type of policy depends on what?

Answer 6

The current economic climate and the ultimate goals.

Question 7

Contractionary Monetary Policy

Answer 7

Central banks will use contractionary monetary policies when inflation becomes a concern as the economy gets overheated. In this case, prices rise as purchasing power drops.

Question 8

Expansionary Monetary Policy

Answer 8

This type of monetary policy is used to help spur growth when there’s a recession or slowdown. Expansionary monetary policies have limited effects on growth by increasing asset prices and lowering the costs of borrowing, making companies more profitable.

Question 9

What is contractionary m.p

Answer 9

A type of MP authorities choose to implement when there are high inflation rates or an inflationary gap, balance pf payments deficit etc.
It involves the decreasing of the money supply which leads to an increase in the interest rate in the economy

Question 10

What effect does contractionary mp. have

Answer 10

decreasing aggregate demand in the economy