Page 68 - FINAL CFA I SLIDES JUNE 2019 DAY 5
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Session Unit 5:
18. Monetary and Fiscal Policy
LOS 18.f: Describe roles and objectives of central banks, p.111
But to secure price stability you may need to pursue other goals like:
• Exchange rate stability (targeting or pegging).
• Full employment.
• Sustainable positive economic growth.
• Moderate long-term interest rates.
LOS 18.g: Contrast the costs of expected and unexpected inflation.., p.111
• Higher money holding money costs as people prefer interest-bearing securities (shoe
leather costs)!
• Borrowers gain at the expense of lenders –reverse is true for!
• Lenders require higher I for risk, thus, slowing down investment/ economic activity.
• Unreliable supply and demand data, wrongly triggering production expansion, excess
inventories and subsequent lay offs –increasing the magnitude of business cycles!
