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Study Notes

Monetary Policy - The Impact of a Monetary Stimulus

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

A number of reasons have been put forward to explain why cutting interest rates in the aftermath of a credit crisis and deep recession may have a limited effect on economic activity (broadly defined as a recovery in real GDP and an expansion of employment, profits and investment).

What is a monetary stimulus?

Changes in monetary policy designed to increase aggregate demand including lower policy interest rates and measures to increase the supply of credit through - for example - an expansion of quantitative easing.

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