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2.4 Financial markets and monetary policy (A-level only)

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Question 6

Following a period of sustained high inflation, a central bank decides to implement a program of Quantitative Tightening (QT) by actively selling government bonds back to the financial sector.

All other things being equal, which one of the following combinations, A, B, C or D, is most likely to result from the successful execution of this policy?

OptionCommercial bank reservesGovernment bond yieldsPrices of financial assets
ADecreaseFallRise
BIncreaseRiseFall
CDecreaseRiseFall
DIncreaseFallRise

Combination A

Combination B

Combination C

Combination D

2.4 Financial markets and monetary policy (A-level only) Questions

  1. A Level
  2. /Economics
  3. /2.4 Financial markets and monetary policy (A-level only)