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16 questions
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  • Q1
    Which of these monetary policies is most likely to lead to an expansion of the economy?
    An increase in the size of quantitative easing
    A decrease in the inflation target
    An appreciation in exchange rates
    A rise in real interest rates
    45s
    2.6.2a
  • Q2
    A major feature of the banking crisis on 2008-09 was
    A rise in the productive capacity of the economy
    The pound has remained strong
    Banks are less willing to lend money to businesses
    The government is less likely to lower interest rates
    45s
    4.5.4
  • Q3
    If the Monetary Policy Committee lowers interest rates, this is most likely to
    Shift aggregate demand to the left
    Shift short run aggregate supply to the right
    Shift long run aggregate supply to the left
    Shift aggregate demand to the right
    45s
    2.6.2a
  • Q4
    Expansionary monetary policy is most effective when
    The economy has a positive output gap
    The economy has spare capacity
    The economy is close to full capacity
    The economy is in a liquidity trap
    45s
    2.6.2a
  • Q5
    Which of the following businesses is MOST likely to be adversely affected by higher interest rates?
    Electricity and Gas supplier
    House builder
    Water supplier
    Supermarket
    45s
    2.6.2a
  • Q6
    The policy most appropriate to close the output gap XY by influencing aggregate demand would be
    Question Image
    a cut in income tax rates
    an increase in government spending
    a fall in the exchange rate of the currency
    an increase in the rate of interest
    45s
    2.6.2a
  • Q7
    Which one of the following represents the most likely outcome of cuts in interest rates for an economy, all other things being equal?
    Question Image
    A
    B
    C
    D
    45s
    2.6.2a
  • Q8
    All other things being equal, a large rise in interest rates is most likely to lead to an increase in
    unemployment
    investment
    aggregate supply
    economic growth
    45s
    2.6.2a
  • Q9
    Which one of the following headlines directly indicates the use of monetary policy?
    More money in everyone’s pockets as taxes are lowered
    Government commits itself to reducing poverty through an increase in pensions
    Joy for homeowners as interest rates are slashed
    Big increase in public spending announced in the budget
    45s
    2.6.2a
  • Q10
    The Bank of England is most likely to increase interest rates to prevent an increase in the rate of inflation when
    an increase in aggregate demand leads to a reduction in unemployment
    aggregate demand is increasing more rapidly than the underlying trend rate of growth
    aggregate supply exceeds aggregate demand
    the economy’s underlying rate of growth is increasing
    30s
    2.5.3
  • Q11
    The Monetary Policy Committee is most likely to decrease interest rates if
    there is a negative output gap
    the rate of growth of money wages is above the rate of growth of labour productivity
    employment is rising
    inflation is above target and the exchange rate is high and rising
    30s
    2.6.2a
  • Q12
    The change in real national output from Y1 to Y2 could be due to
    Question Image
    an increase in the government’s budget surplus
    the introduction of new supply-side policies
    an expansionary monetary policy
    an increase in the current account deficit on the balance of payments
    30s
    2.6.2a
  • Q13
    An expansionary monetary policy designed to increase aggregate demand is less likely to achieve this objective if, at the same time, the government
    increases spending on defence
    cuts the basic rate of income tax
    reduces the budget deficit
    increases unemployment benefits
    30s
    4.5.4
  • Q14
    Which 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 employment
    Whenever the government uses contractionary fiscal policy, the Bank of England will use expansionary monetary policy to offset the effects
    Monetary policy is used mainly to affect the supply side of the economy
    Monetary policy may involve the expansion of the money supply to reduce aggregate demand
    30s
    2.6.2a
  • Q15
    Which 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 rate
    A rise in the rate of interest and a fall in the exchange rate
    A fall in the rate of interest and a rise in the exchange rate
    A rise in the rate of interest and a rise in the exchange rate
    30s
    2.2.1

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