IB Economics Topic 3.5.4 Tools of Monetary Policy Revision Notes (HL)

IB Economics Topic 3.5.4 Tools of Monetary Policy Revision Notes (HL) | RevisionDojo

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The central bank has different tools to control the money creation in the economy:
1. Open Market Operations
2. Minimum Reserve Requirements
3. Changes in Central Bank Minimum Lending Rate
4. Quantitative Easing

Open Market Operations

Open market operations work with the buying and selling of government bonds in the bond market.

Definition

Bond

Refers to a signed certificate, which represents a loan given by the bond holder to the borrower in exchange for regular interest payments and the promise to repay the full amount at a set future date.

Note

The buyer of the bond is the lender
The seller of the bond is the borrower

If the central bank wants to lower the interest rates, it can increase the money supply in the economy by buying government bonds from the commercial banks.
1. This will increase the amount of money these commercial banks hold, which increases the amount of loans they can give.
2. This in turn, increases the money supply and leads to decreasing interest rates.

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Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Duis aute irure dolor in reprehenderit

Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt. Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit.

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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The central bank has different tools to control the money creation in the economy:
1. Open Market Operations
2. Minimum Reserve Requirements
3. Changes in Central Bank Minimum Lending Rate
4. Quantitative Easing

Open Market Operations

Open market operations work with the buying and selling of government bonds in the bond market.

Definition

Bond

Note

The buyer of the bond is the lender
The seller of the bond is the borrower

If the central bank wants to lower the interest rates, it can increase the money supply in the economy by buying government bonds from the commercial banks.
1. This will increase the amount of money these commercial banks hold, which increases the amount of loans they can give.
2. This in turn, increases the money supply and leads to decreasing interest rates.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 3.5.4 Tools of Monetary Policy Notes

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

Open Market Operations

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Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

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Open Market Operations

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

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