Tuesday, March 10, 2009

monetary policy

monetary policy is how the government tries to improve the country is economy by using banks and money ,acting on the level of deposits and loans , and on interest rates and exechange rates .
as well as keeping inflation low , agovernment will seek to keep unemployment low and output rising . however,it cannot do all three things at the same time . for instance ,if it is very successfull in lowering unemplpoyment, the shortages of workers may cause wages to rise, as employers bid for more employees. the workers will spend their increased wages in the shops and this may cause prices to rise-thereby causing inflation to rise . agovernment may have to choose therefore between aims or goals . recent governments chose the reduction of inflation as the goal that should be given the utmost priority. unemployment,economic growth and the enormous gap between exports and imports were not

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