External environment - Government policy
Worksheet 2 - Monetary policy - what are they doing with our money?
1. Use the glossary to find a definition of monetary policy. Note this down below:
(2 Marks)
2. Who operates monetary policy in the UK?
(1 Mark)
3. Do a search in the In The News section to find recent examples of changes in monetary policy.
N.B. You may like to try search terms like:
- MPC
- Bank of England
- Interest rates
- Monetary policy
You may get the best results when searching using more than one word if you check the 'Match your phrase exactly?' box under the search button.
Note down the examples below:
a)
b)
c)
d)
e)
(10 Marks)
4. Delete the words in bold in the paragraph below as necessary so that it describes the operation of monetary policy accurately.
Monetary policy in the UK is operated by the Monetary Policy Committee of the Bank of England / Treasury. The committee has eight / nine / ten members and of these three / four / five are internal from the Bank of England / Treasury and the other three / four / five are external and are appointed by the Governor of the Bank of England / Chancellor. The committee meet bi-monthly / monthly / twice monthly to set the level of interest rates. They are aiming to meet an inflation target of 2% / 2.5% / 3% and the rate of inflation is allowed to fluctuate either side of this target by an amount of 1% / 1.5% / 2%. If they feel that inflation is likely to rise then they will increase / decrease interest rates, but if they feel that inflation is likely to fall then they may increase / decrease the interest rate.
(11 Marks)
5. What impact will an increase in interest rates have on businesses? You may find the theory section helpful for this.
(6 Marks)
Total Marks = 30
