The current objectives of monetary policy set by the government
The UK government sets the goals that monetary policy must hit. The main goal is to keep inflation low and stable, currently at 2% per year.
Formula
CPI Inflation Target = 2% (±1pp tolerance band)
Real World
In 2023, with UK CPI at 10.1%, Chancellor Jeremy Hunt's remit letter reaffirmed the 2% target, making the Bank of England legally accountable for explaining its deviation in an open letter to the Chancellor.
Exam Focus
State that the government sets the target but the Bank of England independently decides how to meet it — conflating the two loses marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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