An economy is experiencing high inflation and a positive output gap. The central bank decides to increase its base interest rate to cool the economy. Which row in the table below represents the most likely outcome of this monetary policy action?
| Exchange value of the domestic currency | Volume of new consumer credit | Size of the positive output gap | |
|---|---|---|---|
| A | Appreciates | Decreases | Decreases |
| B | Appreciates | Increases | Increases |
| C | Depreciates | Decreases | Decreases |
| D | Depreciates | Increases | Increases |
Row A
Row B
Row C
Row D
176 exam-style questions on AQA A Level Economics 2.4 Financial markets and monetary policy (A-level only), covering 2.4.1 The structure of financial markets and financial assets, 2.4.2 Commercial banks and investment banks, 2.4.3 Central banks and monetary policy, and 2.4.4 The regulation of the financial system. Each one has a worked solution and a mark scheme showing where the marks go.