We are getting better at understand the basic

principles of monetary policy and its tools

How do you think changes in interest rates can
impact the economy?"
Divide into groups 3/4- (presentation)

Scenario 1
Scenario 2
 Scenario 1: High Unemployment

Situation: The economy is experiencing a significant increase in unemployment rates, leading to social and economic challenges.

Instructions:
1.Discussion:
In your group, discuss the possible reasons for high unemployment. Consider factors such as technological changes, lack of
demand, or structural issues in the labor market.
2.Identify Monetary Policy Tools:
Consider potential monetary policy tools that could be employed to address high unemployment. Examples include:
- Decreasing Interest Rates: How might lowering interest rates stimulate spending and investment, potentially leading to job
creation?
3.Create a Brief Presentation:
Each group should create a brief presentation explaining:
1. The selected monetary policy tools.
2. Rationale behind choosing these tools.
3. Anticipated effects on unemployment.

Resources: online / textbook

 Scenario 2: High Inflation

Situation: Inflation rates are soaring, impacting the purchasing power of consumers and creating uncertainty in the economy.
Instructions:
1.Discussion:
In your group, discuss the potential causes of high inflation. Consider factors such as increased demand, supply-side
shocks, or excessive money supply.
2.Identify Monetary Policy Tools:
Consider potential monetary policy tools that could be employed to address high inflation. Examples include:
1. Increasing Interest Rates: How might raising interest rates help reduce spending and control inflation?

3.Create a Brief Presentation:

- Each group should create a brief presentation explaining:
1. The selected monetary policy tools.
2. Rationale behind choosing these tools.
3. Anticipated effects on inflation.
Resources: online / textbook
PRESENTATION (each group 5 minutes)

 Other group: find questions

 How many tools (measurements) of Monetary policy has been discussed?
Plenary: 0455/21/O/N/2023

Identifytwo monetary policy

measures. [2]
Plenary: 0455/21/O/N/2023

Identify two monetary policy measures.

[2]
- Interest rare
- Exchange rate
- Money supply
 Plenary: 0455/21/O/N/2016

Discuss whether a cut in the rate of interest

will increase a country’s economic growth
rate. [8]
 Plenary – model answer:

A cut in the rate of interest means it is now cheaper/easier to borrow (1) more people may
borrow (1) this may increase consumer expenditure (1) increase investment (1) may increase
productivity (1) increasing productive potential (1) less reward for saving (1) people will save
less (1) total demand would increase (1) encouraging firms to increase output (1).

Households may not spend more (1) firms may not spend more (1) they may be pessimistic
about the future (1) may expect the interest rate to rise in the future (1). The economy may
initially be operating at full employment (1) so a cut in the rate of interest may only cause
inflation (1). Increased spending may be on imported goods (1) reducing total (aggregate)
demand (1).
 REFLECTION: STAR

 Strength: What am I good at?

 Target: What I need to improve on?
 Action: What am I going to do to achieve my target?
 Reflection: What is the outcome? - evidence
Homework

 Assign a short reading or online resource for further exploration of the impacts of monetary policy on
individuals and businesses.

 https://www.nst.com.my/business/2023/03/894030/exchange-rate-and-malaysias-economy
 https://www.businesstimes.com.sg/international/asean/malaysia-central-bank-chief-rules-out-interest-rate-cut-n
ow