A central bank wishes to adopt a contractionary monetary policy stance to curb rising domestic inflation. Which of the following combinations of measures represents a purely monetary policy action that would achieve this?
Purchasing government bonds on the open market and raising the main policy interest rate.
Increasing the main rate of corporation tax and reducing public sector infrastructure investment.
Selling government bonds on the open market and increasing the reserve requirement ratio.
Decreasing the interest rate paid on commercial bank reserves and lowering the minimum reserve ratio.
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.