Which one of the following statements relating to monetary policy is correct?
A reduction in the central bank interest rate will always lead to an increase in real national output.
While aimed at dampening aggregate demand to curb inflation, a rise in interest rates can also cause cost-push inflation.
Quantitative easing is a monetary policy tool designed to decrease liquid reserves in the banking system.
An increase in the policy interest rate has no direct or indirect impact on the exchange rate.
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.