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Quizzes & Activities

Monetary Policy (Quizlet Activity)

AS, A Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

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

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