Which of the following is the most likely direct consequence of a central bank undertaking a sustained program of quantitative tightening (QT) through the sale of government bonds to the secondary market?
A fall in government bond yields, lowering the cost of borrowing for firms.
An increase in commercial bank reserves, stimulating the creation of bank deposits.
A decrease in government bond prices and a corresponding rise in long-term interest rates.
A depreciation of the domestic currency due to net capital outflows.
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.