Central Banks and Monetary Policy — AQA Past Paper Questions

Assess whether an increase in the money supply is always damaging for an economy.

2.4.3 Central Banks and Monetary Policy · 2.3.3 Inflation and Deflation

Using the data in Extract D (Figure 3), calculate the value of bonds that had been purchased by November 2020 for every £1 worth of bonds purchased by November 2009. Give your answer in £s and to two decimal places.

2.4.3 Central Banks and Monetary Policy

Explain how the data in Extract D (Figure 4), show that the growth in quantitative easing (shown in Figure 3) may have been successful in helping the UK achieve its macroeconomic objectives since 2009.

2.4.3 Central Banks and Monetary Policy

Extract F (lines 18–19) states: ‘Some say that the use of QE is a dangerous addiction and its overuse can lead to problems in the future.’ Using the data in the extracts and your knowledge of economics, assess the view that the continued use of quantitative easing (QE) is damaging for the UK economy.

2.4.3 Central Banks and Monetary Policy

Extract E (lines 15–17) states: ‘Policies were put in place to reduce the money supply and reduce government spending. The control of inflation became the main target of UK government macroeconomic policy.’ Using the data in the extracts and your knowledge of economics, evaluate the view that achieving a low and stable rate of inflation should be the main economic objective of governments.

2.4.3 Central Banks and Monetary Policy · 2.5.1 Fiscal Policy

Explain how the data in Extract D (Figures 3 and 4) show why the South Korean central bank may have been considering a further cut in its base rate of interest.

2.4.3 Central Banks and Monetary Policy

Explain how the monetary policy transmission mechanism works when the Monetary Policy Committee (MPC) raises Bank Rate.

2.4.3 Central Banks and Monetary Policy

Extract F (lines 10–12) states ‘The Austrian economist, Friedrich Hayek, highlighted artificially low interest rates and excessive credit creation as being the main causes of cyclical instability.’ Using the data in the extracts and your knowledge of economics, evaluate the view that maintaining low interest rates for a sustained period of time may be damaging to the UK’s macroeconomic stability.

2.4.3 Central Banks and Monetary Policy