Central banks, like the Bank of England, play a big role in how the economy works. They do this by using something called monetary policy. This special tool helps them adjust interest rates and control the money supply.
Interest Rates: When central banks lower interest rates, borrowing money becomes cheaper. For example, if you want to buy a house, a lower mortgage rate means you pay less each month. This can lead to people spending more money and investing in things, which helps the economy grow.
Money Supply: Central banks also control how much money is available. By changing the money supply, they can help keep prices stable, which is called managing inflation. If they decide to increase the money supply, businesses have more cash to work with. This extra money can help them grow and create more jobs.
Central banks, like the Bank of England, play a big role in how the economy works. They do this by using something called monetary policy. This special tool helps them adjust interest rates and control the money supply.
Interest Rates: When central banks lower interest rates, borrowing money becomes cheaper. For example, if you want to buy a house, a lower mortgage rate means you pay less each month. This can lead to people spending more money and investing in things, which helps the economy grow.
Money Supply: Central banks also control how much money is available. By changing the money supply, they can help keep prices stable, which is called managing inflation. If they decide to increase the money supply, businesses have more cash to work with. This extra money can help them grow and create more jobs.