An economy is suffering from a prolonged period of stagnant GDP growth and below-target inflation. In response, the central bank decides to implement a substantial programme of quantitative easing (QE) by purchasing government bonds from financial institutions. All other things being equal, this policy action is most likely to lead to a decrease in the:
yield on long-term government debt.
domestic money supply (M4M4M4).
rate of demand-pull inflation.
market price of equity shares and corporate bonds.
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.