Monetary Policy Introduction
Demand Management (Monetary Policy)
AO1
Syllabus requirement
Covers central bank control of money supply and interest rates.
Assessment objectives
AO1 Knowledge and Understanding
Summary
Monetary policy is the use of interest rates and control of the money supply by the central bank (the monetary authority) to influence aggregate demand and overall economic activity. It is a discretionary demand-side policy implemented to meet macroeconomic objectives such as stable inflation and sustainable growth, and the central bank performs roles like managing interest rates, issuing legal tender, acting as lender of last resort, and regulating commercial banks.
