3.2 Monetary Policy

Question 1

What is monetary policy

Answer 1

Question 2

What are the monetary policy instruments

Answer 2

Interest rates 
Quantitative easing (QE)

Question 3

How do interest rates impact monetary policy

Answer 3

Question 4

How does quantitative easing impact monetary policy

Answer 4

Question 5

What are the limitations of monetary policy

Answer 5

Banks might not pass the base rate onto consumers, which means that even if the central bank changes the interest rate, it might not have the intended effect

Even if the cost of borrowing is low, consumers might be unable to borrow because banks are unwilling to lend