The table below shows four possible sets of macroeconomic circumstances for an economy. Which set of circumstances is most likely to cause the central bank to reduce its benchmark interest rate?
| Output gap | Exchange rate | |
|---|---|---|
| A | Negative | Falling |
| B | Negative | Rising |
| C | Positive | Falling |
| D | Positive | Rising |
Negative output gap, falling exchange rate
Negative output gap, rising exchange rate
Positive output gap, falling exchange rate
Positive output gap, rising exchange rate
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.