The central bank of an inflation-targeting economy decides to implement a large-scale programme of Quantitative Easing (QE) by purchasing long-term government bonds from commercial financial institutions. Which of the following combinations of macroeconomic outcomes is most likely to result from this policy?
A fall in sovereign bond yields and a depreciation of the domestic exchange rate
A rise in corporate bond yields and an appreciation of the domestic exchange rate
A fall in equity prices and an increase in commercial bank lending rates
A rise in sovereign bond yields and a decrease in commercial bank credit
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.