Economics internal assesment-government policies

Authors Avatar

Governments have two broad policies of affecting aggregate demand-the total spending on goods and services at a given price level), of an economy, and one of them is through monetary policies.

In an effort to increase aggregate demand, the Polish government has implemented monetary policies - a set of official policies governing the supply of money and the level of interest rates in the economy. Through the polish central bank, the government has cut the interest rate to 3.75%, the lowest interest rate level since 1990.

The new low interest rate – the cost of borrowed money) is expected to have positive effects on the polish economy.

Firstly, it is going to discourage the incentive of saving money in the banks, as people will earn low interest in return. A fall in interest rate will also increase consumer confidence which will probably lead to increased purchase of goods.

Join now!

A fall in interest rate has also relieved those people who currently have mortgage payments as they are the mostly affected by interest rate changes; thus, a fall in interest rate will lead to increased consumption as those consumers will save more money on mortgages to spend on other goods and services.

 The new low interest rate is expected to lead to increased investment- the additional of capital stock to the economy by firms), as it’s cheaper to borrow money. Increased investment could also be encouraged by

Fig 1

A decrease in interest rate will ...

This is a preview of the whole essay