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!
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