Classify a measure as monetary policy, then trace how a change in interest rates, the money supply or the exchange rate alters household and firm financial decisions.
One reason why the price of houses in cities such as Hong Kong, London, and New York is very high, is the low price elasticity of supply of houses. Trade unions in some of these cities are calling for more affordable housing for workers. Governments are also trying to implement various microeconomic policy measures to reduce the price of houses. In addition, the stability of the housing market can impact upon the effectiveness of monetary policy.
Identify two monetary policy measures.
Identify two monetary policy measures.
Changes in: interest rates (1) money supply (1) foreign exchange rates (1).
2
Accept, but do not expect, quantitative easing as an alternative to money supply. If more than two measures are given, consider the first three.