Monetary Policy Essentials

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Monetary Policy

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Central bank actions to control money supply

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Central Bank

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Institution managing currency and monetary policy

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Interest Rate

Back

Cost of borrowing money

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Inflation

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General increase in prices

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Deflation

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General decrease in prices

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Open Market Operations

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Buying/selling government securities

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Reserve Requirement

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Minimum reserves banks must hold

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Discount Rate

Back

Interest rate for banks borrowing from central bank

Front

Quantitative Easing

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Central bank buys securities to increase money supply

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Tight Monetary Policy

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Reducing money supply to control inflation