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Monetary Policy: the challenge of interest rates

Published on October 29, 2015   21 min
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My name is John Hearn. I'm a Senior Lecturer at the IFS University College, London. I'm going to talk to you about Monetary Policy: The Challenge of Interest Rates.
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Monetary policy is defined as the central bank managing the overall level of aggregate monetary demand in the economy, using two main policy levers. Firstly, it can manage the volume of money, leaving interest rates to be determined by market forces. Secondly, it can manage the price of money, or what is usually referred to as the interest rate. And that is the challenge posed by this lecture. Before we move on, please note that both monetary policy and fiscal policy make up the government's demand management policies. Fiscal policy is defined in the same way as monetary policy, that is, managing the overall level of aggregate demand. And the only difference is in the levers used. Where fiscal policy makes its adjustments through spending, taxation, and borrowing, monetary policy makes its initial adjustment to the volume of money or the price of money.
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Monetary Policy: the challenge of interest rates

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