A central bank decides to lower its benchmark interest rate to stimulate economic growth and boost aggregate demand. This policy is less likely to be effective if, at the same time:
commercial banks choose to increase their lending margins and tighten credit requirements.
there is a significant increase in business and consumer confidence.
the government decides to increase its spending on public infrastructure projects.
the external value of the domestic currency falls, boosting net export demand.
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.