FDNECON MONETARY SHOOTER BOOMERANG

MEET THE NEW POLAROID

Interest Rates

What does Monetary Policy use to influence the Economy?

Medium of Exchange, Unit of Account, Store of Value

Three Functions of Money

Medium of Exchange

It allows us to buy and sell goods and services easily.

Barter System

What Medium of Exchange was Problematic?

Unit of Account

It allows us to have a common measure of value.

Store of Value

It allows us to save purchasing power for the future; relatively riskless compared to risky assets

Inflation

What is an Issue of Money?

Inflation

It affects the value of money, mainly the money purchasing power, reducing the value of money overtime.

Interest

Something you pay when you borrow Money

Interest Rate

It is the government intervention to control the value of money (inflation); rate of payment or loan in terms of annual percentage

Inverse Relationship

The Kind of Relationship that Interest Rate has when in terms of Borrowing and Spending

Due to Higher Rate, Cost of Borrowing goes Low, Reward Saving goes High.

What happens to Borrowing and Reward Saving when Interest Rates get less money in the economy?

Due to Lower Rate, Cost of Borrowing goes High, Reward Saving goes Low.

What happens to Borrowing and Reward Saving when Interest Rates get more money in the Economy?

Money Demand

It measures the demand for money; can shift due to real GDP.

Money Demand is Low

What happens to MD if the interest rate is high?

Money Demand is High

What happens to MD if the interest rate is low?

Money Supply

It is the total money in circulation (cash); does not depend on interest rates; controlled by BSP

The Central Bank

It is the heart of the economy.

The Central Bank

It pumps money into the economy to keep it healthy and growing and it is the only government authority to do monetary policies.

Stable Inflation

What does the Central Bank address through Interest Rates?

Expansionary Monetary Policy

It happens when there is too much money, making less interest rates.

Contractionary Monetary Policy

It happens when there is Less Money, making Interest Rates go high.

Mickey Mouse Money

A great example of printing more money does not mean it’s good

Mickey Mouse Money

It is a fiat currency made by the Japanese Government; Their Trick to the Filipinos to make them think they had lots of money.