Monetary policy

A government cuts the rate of interest. Which group is most likely to be negatively affected by this policy?

May/June 2015

The Mexican economy has been performing strongly in recent times. Its monetary policy has reduced inflation, which has enabled money in the country to carry out its functions more efficiently. How efficiently a country’s industries operate depends on a variety of influences. These include the use of division of labour and the extent of the country’s trade protection.

May/June 2015

What does the term expansionary monetary policy mean?

May/June 2016

In July 2016, the Sveriges Riksbank, Sweden’s central bank, reduced the rate of interest to 0.25%. The Swedish economy was facing deflation, with the weighted price index down by 0.2% compared with the previous year. The lower rate of interest decreased the value of the krona, Sweden’s currency, and was predicted to end deflation.

May/June 2016

What is likely to occur when the rate of interest rises?

May/June 2017

What would a government cut back on when using an expansionary monetary policy to raise employment?

May/June 2018

Which statement regarding changes in the interest rate is correct?

May/June 2019

The table sets out possible relationships between the rate of interest and other economic variables. Which sequence is most likely?

May/June 2019

Over the last few years, some central banks have cut interest rates to under $1\%$ per year. What is the aim of this monetary policy?

May/June 2019

In February 2017, China’s central bank increased the interest rate. Its aim was to cut borrowing and slow the expansion of the money supply, although it was concerned that a higher interest rate could lower the nation’s economic growth rate. This change in interest rate is likely to have added to the workload of skilled commercial bank workers.

May/June 2019

Interest rates are sometimes increased to help control inflation. Why could this policy be effective?

May/June 2021

A government applies expansionary monetary policy. What does the government lower?

May/June 2021

Australia went through a drought in 2018, which reduced its agricultural output. In 2018, Australia’s secondary and tertiary sectors did better than the primary sector. All three sectors were influenced by the steps the central bank used to prevent deflation. A number of firms gained from these measures and raised their output.

May/June 2021

Why might an increase in the interest rate cause inflation to fall?

May/June 2022

A government wants to adopt an expansionary monetary policy. What action should it take?

May/June 2022

A country wants to bring down the rate of inflation. Which combination of policy measures will be the most effective?

May/June 2022

A country’s central bank increased the rate of interest from $1\%$ to $4\%$ per year. In what way would this have influenced the amount saved and the cost of borrowing for individuals?

May/June 2023

Government policy actions can influence economic activity in a country. Which pair of monetary policy measures would be likely to raise employment?

May/June 2023

Monetary policy often involves changes in which variables?

May/June 2025

During a recession triggered by a pandemic, many central banks across the world cut interest rates. What macroeconomic objective was this policy most likely intended to achieve?

May/June 2025

Governments make use of monetary policy, for example by raising the rate of interest. What is one effect of raising the rate of interest?

Oct/Nov 2015

What will assist a government in lowering the inflation rate when it is increased?

Oct/Nov 2017

What, if it rises, will enable a government to bring down the inflation rate?

Oct/Nov 2017

With a population of $3.5$ million, Moldova is one of Europe’s poorest countries and living standards are relatively low. In $2015$, the economy entered recession and inflation doubled. Moldova’s central bank lifted its interest rate from $8.5\%$ to $15.5\%$.

Oct/Nov 2017

The government applies monetary policy and cuts the interest rate. What could be one result of this?

Oct/Nov 2019

What can a central bank raise in order to cut consumer borrowing?

Oct/Nov 2020

What can a central bank raise to cut consumer borrowing?

Oct/Nov 2020

A country’s central bank lowers interest rates in order to support the economy during a recession. What effect is this reduction in interest rates most likely to have on saving and borrowing with the country’s commercial banks?

Oct/Nov 2022

A central bank cuts interest rates. Which of the following would not result from this action?

Oct/Nov 2022

What is likely to happen if the rate of interest rises?

Oct/Nov 2023

Can you give one example of monetary policy?

Oct/Nov 2024

In 2021, Turkey’s central bank reduced the interest rate on four separate occasions. This happened even though the country’s inflation rate climbed from 15% at the start of the year to 36% by the end of the year. Turkish commercial banks drew in more customers, which caused bank deposits to rise by 10%. Later that year, the Turkish lira dropped to a record low against the US dollar.

Oct/Nov 2024

What is the most likely effect of a decrease in interest rates?

Oct/Nov 2025