3.2.3.2 Monetary policy

• The main objectives of monetary policy are to control inflation and support economic growth.

  True
• The Central Bank is the key institution responsible for monetary policy
• Match the monetary policy tool with its description:

  Interest Rates ↔️ Influences borrowing and lending rates

  Reserve Requirements ↔️ Sets minimum reserves for banks

  Open Market Operations ↔️ Buys and sells government securities
• The base interest rate is the rate at which central banks lend money to commercial banks.


  True
• The Central Bank uses monetary policy tools to manage the economy's money supply and credit conditions.


  True
• The base interest rate influences borrowing costs, affecting investment and consumer spending
• Fiscal policy involves the government's use of taxation and government spending
• Match the fiscal and monetary policy comparison points:

  Fiscal Policy Tools ↔️ Taxation, government spending

  Monetary Policy Tools ↔️ Interest rates, open market operations
• Monetary policy is taken by a central bank to manage the money supply and credit conditions
• The Central Bank, such as the Bank of England, is responsible for monetary policy.


  True
• Lowering the base interest rate increases borrowing and consumer spending
• Lowering interest rates tends to increase inflation as demand rises.


  True
• Weak transmission of monetary policy tools reduces their effectiveness.

  True
• Monetary policy is less effective in addressing structural issues like supply-side shocks
• Monetary policy refers to the actions taken by a central bank to manage the money supply and credit conditions
• Steps involved in monetary policy implementation

  1️⃣ Adjust interest rates

  2️⃣ Adjust reserve requirements

  3️⃣ Engage in open market operations
• The main objectives of the Central Bank are to control inflation and support economic growth.


  True
• The Central Bank can adjust the base interest rate to influence borrowing and lending rates
• Monetary policy aims to manage the money supply and credit conditions to control inflation
• Steps involved in implementing monetary policy using interest rates

  1️⃣ Adjust base interest rate

  2️⃣ Commercial banks respond

  3️⃣ Borrowing and lending change
• Reserve requirements control the amount of money banks can lend, affecting the money supply.


  True
• Coordination between fiscal and monetary policies is crucial for consistent economic management.


  True
• Monetary policy objectives include controlling inflation and supporting economic growth.


  True
• Monetary policy aims to control inflation and support economic growth
• By adjusting monetary policy tools, the Central Bank manages the money supply and credit conditions.


  True
• Reserve requirements affect the amount of money banks can lend, influencing the money supply.

  True
• Expansionary monetary policy increases Aggregate Demand but can lead to higher inflation
• The effectiveness of monetary policy depends on a range of factors and careful calibration by central banks.


  True