Monetary Policy And Its Effect On Economic Growth

Economics for Business 2 Topic: Recent Monetary Policy in Australia Monetary policy is important to the economic growth, and it involves setting the interest rate on overnight loans in the money market (RBA 2015). This interest rate is also called the cash rate, and it influences other interest rates in economy which include the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation (RBA 2015). Why do you think that monetary policy is less effective in boosting economic growth than it is in restricting economic growth? How do lower interest rates boost aggregate demand in the economy? According to the most recent monetary policy, which is released on 04 August 2015 by Glenn Stevens, l will investigate all the possible effects in economy those are influenced by the change of monetary policy. After their recent meeting, the Board made a wise decision and maintained the interest rate at 2.0 per cent. And refer to the earlier announcements this year; we all know that the rates have been changed twice in 2015, because RBA decided to support the economy, and wanted to reduce the rise in unemployment. But there are possible growing risks from lower rates. Lower interest rates effect the economy growth in varies ways, it makes cheaper and easier to borrow, which tends to encourage investment, spending and consumption. Thus it directly boosts aggregate demand and economic growth. Bu t at the same time, it also causes inflationary pressures.Show MoreRelatedBrazil s Monetary Policies And Its Effects On Country s Economic Growth3786 Words   |  16 Pages 4 5. Mexico’s Monetary Policies and Its Effects on the Economy 4 - 9 6. Recommendations 10 7. Key Findings 10 8. Conclusion 11 9. References 12 10. Appendix 13 1. Introduction The main purpose of this report is to critically analyse Mexico’s monetary policies in past 15 years and their impact on country’s economic growth. 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