Over the past decade, central banks across the globe, including the Bank of England, have maintained policy interest rates at historic lows. While these expansionary monetary policies designed to stimulate aggregate demand succeeded in preventing a deeper economic depression, their persistence has sparked intense debate. Some economic analysts suggest that ultra-low interest rates are distorting financial markets, keeping 'zombie firms' alive, and penalising savers, thereby worsening wealth inequality.
Extract C (lines 14–15) states: 'While near-zero interest rates supported the initial recovery, their long-term consequences on productivity and wealth inequality remain highly contentious.'
Using the extract and your knowledge of economics, assess the view that a prolonged period of ultra-low interest rates is beneficial for the UK economy.
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.