Monetary Policy
Central bank action controlling money supply/interest rates to influence economy.
Formula
Money Supply / Interest Rates → Inflation / Growth
Real World
When the Bank of England raised interest rates to 5.25% in 2023 to combat inflation, mortgage costs rose, reducing consumer spending and slowing retail sales.
Exam Focus
Always trace the transmission mechanism: interest rate change → consumer/business behaviour → impact on the firm in the case study.
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