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    Official interest rate decisions affect economic activity and inflation through several channels. These channels are known collectively as the 'transmission mechanism' of monetary policy.

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    Official interest rate decisions affect economic activity and inflation through several channels. These channels are known collectively as the 'transmission mechanism' of monetary policy.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    17 views10 pages

    CB

    Uploaded by

    prjivi
    Official interest rate decisions affect economic activity and inflation through several channels. These channels are known collectively as the 'transmission mechanism' of monetary policy.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 10

    HANSHA CHAUDHARY ANJALI GUPTA KAVITA GIRGAVKAR REEMA NAIK

    6730 6748 6750 6711

    JESSICA KAUSHIK
    TEJASHRI

    6729
    6708

    Decisions about that official interest rate affect economic activity and inflation through several channels, which are known collectively as the transmission mechanism of monetary policy.

    Affects

    banks and money-market interest rates Affects expectations Affects asset prices Affects saving and investment decisions

    Affects

    the supply of credit Leads to changes in aggregate demand and prices Affects the supply of bank loans

    Housing

    market & house prices (wealth effects) Effective disposable incomes of mortgage payers Credit demand Investment & Stock building: Sterling Exchange Rates A Redistribution of Income for Savers & Borrowers

    Short-term

    interest rates Long-term interest rates Asset prices The exchange rate Expectations and confidence

    Firms Individuals

    Long-run

    neutrality of money Inflation a monetary phenomenon

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