Essay
15 marker - Explain how the monetary policy Transition Mechanism works when the MPC raises Bank Rates
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Economics Paper 2, A* essay on the Transition Mechanism
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Bank rate could be defined as interest rate at whichthe Uk's central bank lends to the High Street
way
banks Changing it has effect on the short term economic
growth or in other words actualgrowth through the
transition mechanism
SEEM LAS
AR AD
I Yee над
One how the transition we charism works when the
way
Bank Rate is increased reducing the consumption level
is in
the
economy
As
my diagram shows the level of actual
reduced represented
is AD AD shalt therefore
growth by
may be
lowering the real national output y Y This
the case because rising the Bank Rate means it becomes
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