Principles of Macroeconomics / Unit 13 MAC 1219 short lesson, about 20 seconds
Two Ways a Central Bank Moves the Rate
Captions available
The idea
A central bank has two levers. Monetary policy, since lower rates weaken a currency and higher rates strengthen it. Or direct intervention, selling its own currency or spending reserves to buy it.
In practice
Buying its own currency requires foreign reserves, and reserves run out.
Where people slip
Using monetary policy on the rate means not using it on inflation or recession.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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