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The primary aim of the ECBs monetary policy is to maintain price stability - Leaving Cert Economics - Question 7 - 2016
Question 7
The primary aim of the ECBs monetary policy is to maintain price stability. (a) Define the term monetary policy. (b) Outline two benefits of price stability for th... show full transcript
Worked Solution & Example Answer:The primary aim of the ECBs monetary policy is to maintain price stability - Leaving Cert Economics - Question 7 - 2016
Step 1
Define the term monetary policy.
Answer
Monetary policy refers to actions carried out by the European Central Bank (ECB) aimed at managing the money supply, interest rates, and credit availability in the economy. These actions influence economic performance by affecting inflation rates, purchasing power, and overall economic growth.
Step 2
Outline two benefits of price stability for the Irish economy.
Answer
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Maintain value of money: Price stability helps ensure that the purchasing power of money is preserved over time. This allows individuals and businesses to plan their finances more effectively, leading to a higher standard of living.
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Improved international competitiveness: A stable price environment enables Irish exports to remain competitive. When inflation is controlled, the cost of goods remains predictable, facilitating trade relations and attracting foreign investment.