Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download What the Bank of Canada Tries to Do
Document related concepts
Transcript
What the Bank of Canada Tries to Do Monetary Policy Process by which the government affects the economy by influencing the expansion of money and credit How is this done? Economic prosperity? Economic downswing? Types of Monetary Policies Easy money - Monetary policies of low interest rates, easy availability of credit and growth of the money supply - Can be used to curb recessions Types of Monetary Policies Tight Money - High interest rates, more difficult availability of credit and decrease in the money supply - Used to restrain economy in times of expansion *Visual from yesterday Let’s Decide on Policy Increase or Decrease? Item Consumer Spending Business Investment Interest Rates Bank Lending Money Supply Growth Inflation Unemployment Easy Money Tight Money Item Easy Money Tight Money Consumer Spending Increase Decrease Business Investment Increase Decrease Interest Rates Decrease Increase Bank Lending Increase Decrease Money Supply Growth Increase Decrease Inflation Increase Decrease Unemployment Decrease Increase The Role Of Interest Rates Affect our decisions as consumers about saving and borrowing money Higher interest rate = Affects the economy: - business decisions - value of Canadian dollar - government budgets Demand for loan able funds Three sources - Consumers - Business - Government Supply and Demand Let’s Refresh Lower interest rates = more funds borrowed Higher interest rates = less funds borrowed How Does Interest Affect Us? Major purchases Business Investment Rate of return – amount of extra revenue an investment will bring in Government borrowing Where does the money come from? Individuals Businesses Chartered banks Supply and demand? Where does the money come from? Individuals - Increase or decrease amount of $ in their savings account Reasons for saving? (recap) Where does the money come from? Business - Same as individuals (amount of $) - Save money to cover future purchases - May also save for future expansion Where does the money come from? Banks How do banks create money? - If interest rates increase, chartered banks will want to supply more $ Why? Determine how each of the following will affect interest rates and S & D 1. The economy is recovering from a recession; people tend to save less and consume more. 2. A recession causes consumers to buy fewer houses, cars and other major purchases. 3. Businesses invest more in new plants and machinery as the economy continues to grow. Continued 4. Unemployment and falling incomes cause a drop in savings 5. Profit levels for business continue to increase.
