Role of Central Banks — Edexcel Past Paper Questions

With reference to Extract B, discuss the use of quantitative easing in preventing deflation.

2.6.2 Demand-Side Policies · 4.4.3 Role of Central Banks

Evaluate the microeconomic and macroeconomic effects of high interest rates in Ghana, or another developing country of your choice.

One of two options in Section B — candidates answered this or the other.

2.6.2 Demand-Side Policies · 4.4.3 Role of Central Banks

Evaluate the microeconomic and macroeconomic effects of decreasing interest rates in Kenya, or another developing country of your choice.

One of two options in Section B — candidates answered this or the other.

2.6.2 Demand-Side Policies · 4.4.3 Role of Central Banks

The European Central Bank introduced a new round of quantitative easing (QE) in March 2020, purchasing up to €750 billion of assets. The objective of this QE was to reduce the serious risks to the effectiveness of monetary policy resulting from a significant recession. The European Central Bank’s target for inflation remains at ‘below but close to 2%’. (Source adapted from: https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html) Evaluate the effectiveness of quantitative easing during ‘a significant recession’.

One of two options in Section C — candidates answered this or the other.

2.6.2 Demand-Side Policies · 4.4.3 Role of Central Banks

Explain how the Turkish central bank intervenes in the currency market to prevent ‘excessive appreciation or depreciation of the Turkish lira’ (Extract A, lines 7–8).

4.1.8 Exchange Rates · 4.4.3 Role of Central Banks

Discuss whether providing substantial government financial support to banks is the best policy response during a financial crisis.

4.4.2 Market Failure in Finance · 4.4.3 Role of Central Banks

Discuss the likely success of the ECB’s quantitative easing programme in moving Eurozone inflation closer to ‘the central bank’s ceiling of 2%’ (Extract A, line 17).

2.6.2 Demand-Side Policies · 4.4.3 Role of Central Banks