US High School Economics class: China’s central bank plans policy overhaul as pressure mounts on economy

This articlepicked by a teacher with suggested questions is part of the Financial Times free schools access programme. Details/registration here.

Read our full range of US High School economics picks here.

Specification:

• Monetary Policy

Click to read the article belowand then answer the questions:

China’s central bank plans policy overhaul as pressure mounts on economy

• What interest rate is the PBoC targeting as its primary policy tool?

• How is the PBoC’s targeting of a specific interest rate a departure from its previous policy implementation? 

• How is the PBoC’s interest rate targeting similar to monetary policy in other countries? 

• Explain what happens to the money supply when the PBoC purchased government bonds for the first time in two decades. What other policy levers used by the PBoC would have a similar effect?

• What hurdles does the PBoC face in switching to an interest rate targeting monetary policy system?

Ariel Slonim at MRU’s Econ in the News