Unit 3.5 · Demand Management (Monetary Policy)
Money Market and Interest Rates (HL only)
AO2AO4HLDiagram required
Syllabus Requirement
Explains how the supply and demand for money determines interest rates in the money market.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
HLThis topic is assessed at Higher Level only.
Summary
Monetary policy involves the government's management of interest rates and the money supply to influence aggregate demand and economic activity. It is a discretionary demand-side policy executed by the central bank, which plays a crucial role in regulating the economy through various functions.