All other things being equal, in which one of the following economic scenarios is a central bank most likely to increase its main policy interest rate to achieve its macroeconomic and financial stability objectives?
A sustained appreciation of the trade-weighted exchange rate coinciding with a contraction in the manufacturing Purchasing Managers' Index (PMI).
An increase in the household savings ratio alongside a contraction in the broad money supply (M4M4M4) and falling asset prices.
A persistent depreciation of the domestic currency accompanied by a positive output gap and rising unit labour costs.
A widening of corporate bond credit spreads accompanied by a decline in consumer confidence and a negative output gap.
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.