Monetary policy
Short questions
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Why is the UK's inflation target not zero?
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Explain how changes in interest rates affect aggregate demand.
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For the UK economy, what is the approximate 'neutral zone' for interest rates?
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What is the estimated time lag between change of interest rates and a change in the price level?
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Why is it generally considered beneficial for interest rates to be changed by a small amount at a time?
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Explain the problem of the 'dual economy' and how it affects interest rate decisions.
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What is the 'liquidity trap'?
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What is Goodhart's Law?
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Do changes in interest rates primarily affect the supply of money or the demand for money? Explain your answer.