The central bank of the Republic of Astoria operates under an inflation-targeting framework, with a mandate to maintain price stability (targeting an annual consumer price index inflation rate of 2.0%). To achieve this economic policy objective, the central bank adjusts its main policy interest rate to manage aggregate demand and control inflationary pressures.
Table 1 shows the annual inflation rate and the central bank's policy interest rate in Astoria from 2013 to 2022.
Table 1: Inflation and policy interest rates in Astoria (2013–2022)
| Year | Annual Inflation Rate (CPI) (%) | Central Bank Policy Interest Rate (%) |
|---|---|---|
| 2013 | 1.8 | 1.00 |
| 2014 | 1.5 | 0.75 |
| 2015 | 0.5 | 0.50 |
| 2016 | 0.8 | 0.50 |
| 2017 | 2.1 | 1.00 |
| 2018 | 2.5 | 1.25 |
| 2019 | 1.9 | 1.00 |
| 2020 | 0.7 | 0.25 |
| 2021 | 3.2 | 0.75 |
| 2022 | 7.5 | 2.50 |
Source: Astoria Central Bank Statistical Bulletin
Refer to Table 1.
Describe the relationship between the annual inflation rate and the central bank policy interest rate in Astoria between 2013 and 2022.
43 exam-style questions on OCR A Level Economics Trends in macroeconomic indicators. Each one has a worked solution and a mark scheme showing where the marks go.