Table 1 shows changes in an economy during the year after its central bank raised the interest rate from 2% to 5%.
| Indicator | Before the rise | One year later |
|---|---|---|
| Interest rate | 2.0% | 5.0% |
| Inflation rate | 6.0% | 3.2% |
| Real GDP growth | 2.4% | 0.5% |
| Unemployment rate | 4.2% | 5.6% |
| Exchange-rate index | 100 | 108 |
Using Table 1, analyse how the rise in interest rates may create a conflict between government economic objectives.
104 exam-style questions on AQA GCSE Economics 2.3 How the government manages the economy, covering 2.3.1a Fiscal policy and income and expenditure, 2.3.1b Fiscal policy and government objectives, 2.3.1c The government budget, 2.3.2a The meaning of monetary policy, 2.3.2b Uses of monetary policy, 2.3.3a Supply-side policies and their trade-offs, 2.3.3b Using supply-side policies, and 2.3.4 Policies to correct positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.