All other things being equal, a significant and unexpected increase in a central bank's policy interest rate is most likely to lead to which of the following combinations of outcomes in financial and product markets?
A rise in the market price of existing government bonds, an appreciation of the domestic currency, and an increase in the rate of household saving.
A fall in the market price of existing government bonds, an appreciation of the domestic currency, and a decrease in aggregate demand.
An increase in hot money outflows, a depreciation of the domestic currency, and a fall in the cost of household debt servicing.
An increase in commercial bank lending, a fall in the rate of household saving, and an increase in business investment.
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.