AS Econ - Macro - Monetary Policy
Quiz by Mark Seccombe
EdExcel (A-Level)
Economics A
English National Curriculum
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16 questions
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- Q1Which of these monetary policies is most likely to lead to an expansion of the economy?An increase in the size of quantitative easingA decrease in the inflation targetAn appreciation in exchange ratesA rise in real interest rates45s2.6.2a
- Q2A major feature of the banking crisis on 2008-09 wasA rise in the productive capacity of the economyThe pound has remained strongBanks are less willing to lend money to businessesThe government is less likely to lower interest rates45s4.5.4
- Q3If the Monetary Policy Committee lowers interest rates, this is most likely toShift aggregate demand to the leftShift short run aggregate supply to the rightShift long run aggregate supply to the leftShift aggregate demand to the right45s2.6.2a
- Q4Expansionary monetary policy is most effective whenThe economy has a positive output gapThe economy has spare capacityThe economy is close to full capacityThe economy is in a liquidity trap45s2.6.2a
- Q5Which of the following businesses is MOST likely to be adversely affected by higher interest rates?Electricity and Gas supplierHouse builderWater supplierSupermarket45s2.6.2a
- Q6The policy most appropriate to close the output gap XY by influencing aggregate demand would bea cut in income tax ratesan increase in government spendinga fall in the exchange rate of the currencyan increase in the rate of interest45s2.6.2a
- Q7Which one of the following represents the most likely outcome of cuts in interest rates for an economy, all other things being equal?ABCD45s2.6.2a
- Q8All other things being equal, a large rise in interest rates is most likely to lead to an increase inunemploymentinvestmentaggregate supplyeconomic growth45s2.6.2a
- Q9Which one of the following headlines directly indicates the use of monetary policy?More money in everyone’s pockets as taxes are loweredGovernment commits itself to reducing poverty through an increase in pensionsJoy for homeowners as interest rates are slashedBig increase in public spending announced in the budget45s2.6.2a
- Q10The Bank of England is most likely to increase interest rates to prevent an increase in the rate of inflation whenan increase in aggregate demand leads to a reduction in unemploymentaggregate demand is increasing more rapidly than the underlying trend rate of growthaggregate supply exceeds aggregate demandthe economy’s underlying rate of growth is increasing30s2.5.3
- Q11The Monetary Policy Committee is most likely to decrease interest rates ifthere is a negative output gapthe rate of growth of money wages is above the rate of growth of labour productivityemployment is risinginflation is above target and the exchange rate is high and rising30s2.6.2a
- Q12The change in real national output from Y1 to Y2 could be due toan increase in the government’s budget surplusthe introduction of new supply-side policiesan expansionary monetary policyan increase in the current account deficit on the balance of payments30s2.6.2a
- Q13An expansionary monetary policy designed to increase aggregate demand is less likely to achieve this objective if, at the same time, the governmentincreases spending on defencecuts the basic rate of income taxreduces the budget deficitincreases unemployment benefits30s4.5.4
- Q14Which one of the following is a correct statement about monetary policy in the UK?Higher interest rates may reduce inflationary pressure but they may also reduce employmentWhenever the government uses contractionary fiscal policy, the Bank of England will use expansionary monetary policy to offset the effectsMonetary policy is used mainly to affect the supply side of the economyMonetary policy may involve the expansion of the money supply to reduce aggregate demand30s2.6.2a
- Q15Which one of the following combinations is most likely to have caused the shift to the left of AD?A fall in the rate of interest and a fall in the exchange rateA rise in the rate of interest and a fall in the exchange rateA fall in the rate of interest and a rise in the exchange rateA rise in the rate of interest and a rise in the exchange rate30s2.2.1
