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Monetary policy - introduction

S:\triplea_resources\DP_topic_packs\economics\student_topic_packs\media_macroeconomics\images\percent_symbol.jpgIn this section we consider the following topics in detail

  • Interest rates
  • The role of monetary policy
  • The evaluation of monetary policy

Monetary policy is the use of interest rates and money supply changes to manage the overall level of demand in the economy and, therefore, help achieve the economic objectives set out in previous sections. For examinations you will need to show how monetary policy is used to achieve macroeconomic objectives. So, think about how monetary policy is used to:

  • Control inflation
  • Help produce growth
  • Keep employment as high as possible
  • Maintain a satisfactory balance of payments