Explain the effects of the mpc decision on the economy

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The Monetary Policy Committee (MPC) of the Bank of England (BoE) has recently decided to raise its bank rate from 0.50% to 0.75%.

(a) Using AD-AS analysis, explain the effects of the MPC's decision on the economy.

(b) Define the terms 'fiscal policy' and describe the relevant tools which the policymaker can use to impact the economy.

(c) Assume that the government decides to run a budget surplus during the same period. Using the analysis made in part (a), describe and explain the effects of the budget surplus on the economy.

Reference no: EM132316912

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