Monetary Policy (Quizlet Revision Activity)

Here is a revision matching quiz covering twelve key concepts used when studying monetary policy.

Monetary Policy Key Terms to Revise

• Base rate: Main policy interest rate set by a central bank
• Deflation: A persistent fall in the general price level of goods and services, negative inflation
• Depreciation: A fall in the market value of one exchange rate against another in a floating currency system
• Expansionary policy: Cuts in interest rates or an increased supply of credit designed to increase the growth of AD
• Real interest rate: Nominal rate of interest adjusted for inflation
• Fine tuning: Small / gradual changes in interest rates designed to achieve a desired macro policy outcome
• Hot money: Money that flows freely and quickly around the world looking to earn the best rate of return
• Liquidity trap: When a period of very low interest rates fails to stimulate aggregate demand
• Money supply: Entire quantity of a country's commercial bills, coins, loans and credit
• Quantitative easing: Introduction of new money into the national supply by a central bank
• Asset bubble: A sustained rise in the prices of housing and equities which takes their values well above sustainable levels
• Central bank: Responsible for operating monetary policy and maintaining financial stability
• Inflation target: Objective set for the central bank to achieve price stability, UK target is 2%, in India, the target is 4%
• Managed float: When a central bank intervenes in a currency market to influence the external value of said currency
• Forward guidance: Policy designed to help financial markets anticipate a change in policy interest rates e.g. rates might rise if unemployment falls below 5%
• Devaluation: A reduction in the external value of a currency inside a fixed exchange rate system

Monetary Policy - Do Low Interest Rates help the UK Economy?

In this revision video we evaluate the extent to which a period of very low monetary policy interest rates has benefitted the UK economy.

Monetary Policy - Selection of Revision MCQs

In this video, we work through a selection of past exam multiple choice questions on a selection of topics all linked to monetary policy. This is a great chance to check your understanding ahead of exams and other assessments!