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

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Question 71

An economy is experiencing a negative output gap, and the central bank decides to lower its base interest rate. Which row in the table represents the most likely outcome of this monetary policy action?

InvestmentSize of the Negative Output GapHousehold Savings
ADecreaseIncreaseIncrease
BIncreaseDecreaseDecrease
CIncreaseIncreaseDecrease
DDecreaseDecreaseIncrease
A

Investment: Decrease; Size of the Negative Output Gap: Increase; Household Savings: Increase

B

Investment: Increase; Size of the Negative Output Gap: Decrease; Household Savings: Decrease

C

Investment: Increase; Size of the Negative Output Gap: Increase; Household Savings: Decrease

D

Investment: Decrease; Size of the Negative Output Gap: Decrease; Household Savings: Increase

Markscheme

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)

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.

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