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2.4 Financial markets and monetary policy (A-level only)

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Question 2

The Monetary Policy Committee (MPC) of the Bank of England meets regularly to determine the benchmark interest rate (Bank Rate) in order to achieve the government's inflation target.

The MPC is most likely to increase interest rates if

A

the economy is experiencing a widening negative output gap.

B

the exchange rate is appreciating rapidly, leading to lower import costs.

C

the annual growth rate of nominal wages significantly exceeds the growth rate of labour productivity.

D

consumer confidence declines, leading to a sustained rise in the household saving ratio.

Markscheme

2.4 Financial markets and monetary policy (A-level only) Questions

  1. A Level
  2. /Economics
  3. /2.4 Financial markets and monetary policy (A-level only)

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.

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