Monetary policy Q2

• What is the primary objective of monetary policy in relation to sustainable development goals?

  Achieving sustainable development goals
• Which UNSDG specifically relates to monetary policy?

  UNSDG 8: Decent Work and Economic Growth
• What are the key roles of monetary policy in economic growth?

  • Stimulating economic growth
  • Maintaining price stability
  • Employment promotion
  • Encouraging investment in productive sectors
  • Promoting inclusive economic growth
• How does maintaining price stability benefit the economy?

  It reduces uncertainty and supports growth
• What is the target inflation rate set by the UK government?

  2%
• What is the role of the Bank of England in monetary policy?

  Maintain monetary and financial stability
• What are the three distinct goals of the Fed's monetary policy?

  Maximum employment, stable prices, moderate interest rates
• What is the dual mandate of the US Federal Reserve?

  Maintaining price stability and full employment
• What is the primary objective of the European Central Bank's monetary policy?

  Ensuring price stability
• What are the definitions of monetary policy goals, instruments, and tools?

  • Goals: Objectives like price stability
  • Instruments: Methods like reserve requirements
  • Tools: Specific actions like open market operations
• What is the interest rate charged on borrowing reserves from commercial banks called?

  Interest rate on borrowing reserves (iff)
• What are conventional monetary policy tools used by central banks?

  Open market operations and discount window lending
• Why are open market operations popular among central banks?

  They are flexible and easily reversible
• What are examples of unconventional monetary policy tools?

  • Expanded lending facilities
  • Large Scale Asset Purchases (QE)
  • Special lending facilities for companies
  • Forward guidance
  • Window guidance
• How does monetary policy support sustainable development goals?

  By promoting economic stability and controlling inflation
• What is the impact of price stability on purchasing power?

  It maintains the purchasing power of currency
• How do conventional and unconventional monetary policy tools differ?

  Conventional tools stabilize, unconventional stimulate growth
• What is the significance of the suggested reading in the study material?

  • Chapters 16 and 17 in Mishkin's book
  • Focus on money, banking, and financial markets
  • Provides deeper insights into monetary policy
• What is the definition of borrowed reserves (BR)?


  Reserves borrowed from other banks
• What is the effect of changing the mandatory reserve requirement?

  It alters the amount of reserves banks must hold
• What is the impact of changing the discount rate on monetary policy?

  It influences the cost of borrowing for banks
• How does forward guidance support economic recovery?

  By signaling future low interest rates
• What is the purpose of window guidance in monetary policy?

  To direct banks on lending practices