Economics 9708 · AS & A Level · Monetary policy

Monetary policy — practice question

(a)[2]

Explain what is meant by saying that Turkey and South Africa hoped a rise in interest rates would ‘strengthen’ their country’s currency.

(b)[4]

Distinguish between monetary policy and fiscal policy and state two examples of fiscal policy.

(c)[6]

Discuss how far the evidence in Table 1 can be used to support the extract’s claims about the links between high interest rates, inflation and economic growth.

(d)[8]

How far does the experience of the countries mentioned in the extract support the view that higher interest rates improve macroeconomic performance?

Worked solution & mark scheme

This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “It means the currency would be worth more relative to other currencies. A rise in interest rates should increase demand for the currency, which would raise its value. The expectation was that the currency would appreciate.” …

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