Economics 9708 · AS & A Level · Monetary policy

Monetary policy — practice question

(a)[12]

‘Central banks can regulate interest rates but they cannot regulate the money supply. Commercial banks can regulate the money supply but they cannot regulate interest rates.’ How far do you agree with this statement?

(b)[13]

‘Monetary policy alone is unlikely to have any major impact on real variables such as the level of output, but it is the only effective way to control inflation’. Critically evaluate this view.

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