国际金融英语part seven macroeconomic control.pptVIP

Unit 22. Goals of Monetary Policy I. What is Monetary Policy? Monetary policy is the central bank’s efforts to regulate the economy by managing the supply and cost of money and credit. It usually has four main goals: maximum employment, a stable price level, maximum and sustainable economic growth, balance in international payments. II. Four Goals of Monetary Policy a. Maximum Employment a) When the economy operates below its capacity, there are some idle resources and workers, which results in unemployment and lower GDP. In order to combat such a situation, the central bank increase money supply to simulate the economy and solve the unemployment problem. b) Types of unemployment i) Frictional unemployment（摩擦性失业） involves searches by workers and firms to find suitable match-ups, is beneficial to the economy. ii) Structural unemployment（结构性失业）is a mismatch between job requirements and the skills or availability of local workers. But monetary policy can do little to handle it. c) The goal of employment Full employment, but not zero unemployment. A certain natural rate of unemployment is about 5 to 6 percent. (demand for labor equals the supply of labor) b. A Stable Price Level Price stability is desirable because a rising price level (inflation) creates uncertainty in the economy, and it may hamper economic growth. If there is a tendency of the rise of price level, the central bank will decrease money supply to slow down the economy to curb inflation. Note: Problems caused by inflation to the economy: (i) Inflation conveyed by the prices of goods and services is harder to interpret when the overall level of price is changing, which complicates the decision-making for consumers, businesses and governments (ii) Inflation also makes it hard to plan the future. (iii) In periods of inflation, wages increase lag behind price increases, that is, inflation erodes earnings. C. Maximum and Sustainable Economic Growth The goal emphasizes