Monetary policy and Money: Difference between pages

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Monetary policy is central government or other policy to stimulate or otherwise influence economic activity by influencing money supply or interest rates.  
Refers to cash (currency notes and coin) in official currency backed by the relevant government. Such money may be [[legal tender]].


Historically, mechanisms for influencing the money supply have included the use of open market operations, quantitative easing, the central bank discount rate and reserve requirements.
More generally, money is anything accepted for the settlement of debts in an economy or jurisdiction.


To the economist, money is whatever is used for four roles:
# A medium of exchange
# A unit of Account
# A store of value and
# A standard for deferred payment


==UK monetary policy==
Money, then, can be many things, but most often today is fiat (let it be) money, i.e. tokens provided by a government and accepted by them for payment of taxes, or abstract representations of it. The latter are mostly as electronic representations in the accounts of banks and other monetary financial institutions, including [[central bank]]s. Most money in developed countries consists of these records rather than of the tokens issued as fiat money.


In recent years the primary objectives of UK monetary policy have been 'stable prices' and confidence in the currency, collectively known as 'monetary stability'.
In the past money has been commodity money, for example gold or silver or valuable spices or shells, the value of which is in the of the valuable material or object rather than a nominal value ascribed to (a portion of) it. A government can issue tokens (e.g. notes or coins) exchangeable for a fixed quantity of such a commodity. Such tokens are known as representative money.
 
'Stable prices' are defined by the UK government's inflation target, currently 2% per annum as measured by the UK Consumer Prices Index (CPI).
 
The objective is to keep inflation close to the target, neither too high nor too low. If inflation moves away from the target by more than 1% in either direction, additional corrective actions will be taken.
 
 
Subject to the primacy of the inflation target, the secondary objectives of monetary policy in the UK are to support the government's other economic objectives, including those for growth and employment.
 
 
Responsibility for setting UK monetary policy - to achieve monetary stability - lies with the Bank of England's Monetary Policy Committee (MPC).
 
 
Monetary policy in the UK has usually operated through setting the Bank of England's interest rate, the Official Bank Rate, or 'Bank Rate'.
 
The Official Bank Rate is sometimes referred to as the 'Bank of England Base Rate'.
 
 
==Quantitative easing in the UK ==
 
In 2009, in addition to setting Official Bank Rate, the MPC started quantitative easing (QE).
 
This means injecting money directly into the economy by purchasing financial assets.
 
QE is designed to stimulate the economy further, beyond what could be achieved by low interest rates alone.




== See also ==
== See also ==
* [[Bank of England]]
* [[Finance ]]
* [[Bank Rate]]
* [[Legal tender]]
* [[Consumer Prices Index]]
* [[Monetisation]]
* [[Debasement]]
* [[Deflation]]
* [[Depression]]
* [[Discount rate]]
* [[Dovish]]
* [[Effective lower bound]]
* [[Financial Policy Committee]]
* [[Financial stability]]
* [[Fiscal policy]]
* [[Hawkish]]
* [[Inflation]]
* [[Inflation target]]
* [[Interest rate]]
* [[Keynesianism]]
* [[Lowflation]]
* [[Monetary]]
* [[Monetary Policy Committee]]
* [[Money supply]]
* [[Official Bank Rate]]
* [[Open market operations]]
* [[Quantitative easing ]]
* [[Recession]]
* [[Reserve requirements]]
* [[Sterling Monetary Framework]]
* [[Supply side policy]]
* [[Unconventional monetary policy]]
* [[Zero lower bound]]
* [[ZLB problem]]
 
 
==External link==
*[https://www.bankofengland.co.uk/monetary-policy/inflation UK monetary policy - Bank of England]
 
[[Category:The_business_context]]

Revision as of 18:35, 9 March 2015

Refers to cash (currency notes and coin) in official currency backed by the relevant government. Such money may be legal tender.

More generally, money is anything accepted for the settlement of debts in an economy or jurisdiction.

To the economist, money is whatever is used for four roles:

  1. A medium of exchange
  2. A unit of Account
  3. A store of value and
  4. A standard for deferred payment

Money, then, can be many things, but most often today is fiat (let it be) money, i.e. tokens provided by a government and accepted by them for payment of taxes, or abstract representations of it. The latter are mostly as electronic representations in the accounts of banks and other monetary financial institutions, including central banks. Most money in developed countries consists of these records rather than of the tokens issued as fiat money.

In the past money has been commodity money, for example gold or silver or valuable spices or shells, the value of which is in the of the valuable material or object rather than a nominal value ascribed to (a portion of) it. A government can issue tokens (e.g. notes or coins) exchangeable for a fixed quantity of such a commodity. Such tokens are known as representative money.


See also