Extract C states: ‘With headline inflation tracking well above the 2% target, the European Central Bank’s Governing Council responded decisively by raising its main refinancing rate to damp demand-pull pressures.’
Explain how an increase in a central bank's key policy interest rate may lead to a reduction in the rate of inflation.
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.