Which one of the following, A, B, C or D, represents the most likely outcome of a reduction in the central bank's policy interest rate for an economy, all other things being equal?
Market price of government bondsCommercial bank lendingExchange rate of the domestic currencyARiseFallRiseBFallRiseRiseCRiseRiseFallDFallFallRise \begin{array}{|c|c|c|c|} \hline & \text{Market price of government bonds} & \text{Commercial bank lending} & \text{Exchange rate of the domestic currency} \\ \hline \mathbf{A} & \text{Rise} & \text{Fall} & \text{Rise} \\ \hline \mathbf{B} & \text{Fall} & \text{Rise} & \text{Rise} \\ \hline \mathbf{C} & \text{Rise} & \text{Rise} & \text{Fall} \\ \hline \mathbf{D} & \text{Fall} & \text{Fall} & \text{Rise} \\ \hline \end{array} ABCDMarket price of government bondsRiseFallRiseFallCommercial bank lendingFallRiseRiseFallExchange rate of the domestic currencyRiseRiseFallRiseMarket price of government bonds: Rise; Commercial bank lending: Fall; Exchange rate of the domestic currency: Rise
Market price of government bonds: Fall; Commercial bank lending: Rise; Exchange rate of the domestic currency: Rise
Market price of government bonds: Rise; Commercial bank lending: Rise; Exchange rate of the domestic currency: Fall
Market price of government bonds: Fall; Commercial bank lending: Fall; Exchange rate of the domestic currency: Rise
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.