Monetary conditions are impacted by ________.
A) short-term interest rates and the foreign exchange rate
B) open market operations and the prime rate
C) the foreign exchange rate and the inflation rate
D) the Department of Finance

Question

Quizplus · Accepted Answer

Monetary conditions refer to the level of money supply and credit availability in an economy. Short-term interest rates and the foreign exchange rate are the two main factors that impact monetary conditions. Short-term interest rates, set by the central bank, determine the cost of borrowing money and therefore impact the level of credit available in the economy. The foreign exchange rate, determined by the supply and demand of currencies, impacts the prices of imports and exports and therefore impacts inflation and overall economic activity. Open market operations and the prime rate are related to monetary policy but do not directly impact monetary conditions. The Department of Finance may play a role in setting fiscal policy but does not directly impact monetary conditions.

Monetary Conditions Are Impacted by ________