monetary policies

• money

  medium of exchange between two parties
• early money

  intrinsic value - made of gold
• fiat money


  no intrinsic value - value derived from being legal tender
• central bank


  monetary authority and major regulatory bank in a country
• monetary policy committee

  group of 9 economists who set interest rates
• bank rate


  interest rate charged by Bank of England to commercial banks
• expansionary monetary policy


  aims to increase AD through decreasing bank rate
• contractionary monetary policy


  aims to reduce AD by increasing bank rate
• interest rate transmission mechanism

  how a change in the official bank rate causes further changes in the economy
• consumer durables

  manufactured items that have a long life
• asset


  item proving value to a firm or investor when owned
• negative interest rate

  central bank lowers the nominal interest rate below 0%
• forward guidance


  central banks communicate future plans and likely rates in advance
• liability


  physical money