MONETARY POLICY
When the Bank of England changes the official interest rate it is attempting to influence the overall level of expenditure in the economy. When the amount of money spent grows more quickly than the volume of output produced, inflation is the result. In this way, changes in interest rates are used to control inflation.
The Bank of England sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.
A reduction in interest rates makes saving less attractive and borrowing more attractive, which stimulates spending. Lower interest rates can affect consumers’ and......

Join Now to view the rest of this term paper!
Members: Login to view this research paper.

Title: Monetary Policy
Approximate Word Count: 1396
Approximate Pages: 6 (250 words per double-spaced page)

With the Term Papers Lab Membership Pass, you get instant access to every essay on this site, including this essay on Monetary Policy, for as long as you remain a member.

Other essays sites charge almost $100 for a single term paper. At Term Papers Lab, you can get instant access to over 100,000 research papers for as little as $29.95!