Monetary policy

• What is monetary policy?

  Set of tools to control money supply
• Why is monetary policy used?

  To promote economic growth and stability
• What are the types of monetary policy?

  • Expansionary
  • Contractionary
• How does monetary policy affect inflation?

  Contractionary policy reduces inflation
• What is expansionary monetary policy?

  Policy to stimulate economic growth
• What is contractionary monetary policy?

  Policy to slow economic growth
• How does monetary policy affect unemployment?

  Expansionary policy decreases unemployment
• What are the tools of monetary policy?

  • Open market operations
  • Interest rates
  • Reserve requirements
• What are open market operations?

  Buying or selling government bonds
• How do interest rates affect the economy?

  Lower interest rates stimulate economic growth
• What is the discount rate?

  Interest rate charged by central bank
• How do reserve requirements affect the economy?

  Lower reserve requirements increase lending
• What is the difference between monetary policy and fiscal policy?

  Monetary policy is set by central bank
• How often does the Federal Open Market Committee meet?

  Eight times a year
• What is the role of the Federal Reserve as a lender of last resort?

  Providing liquidity to banks
• What is the Federal Reserve?

  Central bank of the United States
• What is the role of the Federal Reserve in the US economy?

  Regulating money supply and interest rates
• What is the difference between the Federal Reserve and the US Treasury?

  Federal Reserve is central bank, US Treasury is government department
• How does monetary policy affect the money supply?

  Expansionary policy increases money supply
• What is the relationship between monetary policy and fiscal policy?

  Monetary policy is set by central bank, fiscal policy is set by government
• What is the role of the Federal Open Market Committee?

  Setting monetary policy
• What is the importance of the discount rate in monetary policy?

  Discount rate affects interest rates
• How do reserve requirements affect bank lending?

  Lower reserve requirements increase lending
• What is the relationship between interest rates and inflation?

  Higher interest rates reduce inflation
• How does monetary policy affect employment and economic growth?

  Expansionary policy increases employment and economic growth
• What is monetary policy?

  Central bank's actions to manage money supply
• What are the primary aims of monetary policy?

  Control inflation and interest rates
• How do central banks use monetary policy to ensure economic growth?

  By adjusting the money supply and interest rates
• What is the relationship between monetary policy goals?

  They are interconnected and require balance
• What is one goal of monetary policy related to inflation?

  Maintain price stability
• How does monetary policy promote full employment?

  By stimulating economic activities and job creation
• What is a tool used in monetary policy to influence borrowing costs?

  Base interest rates
• What effect do reserve requirements have on banks?

  They affect the amount available for lending