Saturday, September 06, 2008

Unit 2: The dilemma in setting interest rates (monetary policy)

A good clip from Ch4 on the dilemma facing the BoE in setting interest rates

a) Explain the dilemma faced by the BoE when setting interst rates in terms of conflicting macroeconomic objectives
b) Use AD/AS diagrams to in each case to explain how the BoE could use interest rates to resolve the problems

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