Interest rates are cut, but highly indebted households use the lower repayments to repay existing debt rather than increase consumption. What does this suggest?
Monetary policy has become fiscal policy
The effect of the rate cut on total spending may be weaker than expected
Investment must rise by the full amount of debt repaid
Inflation must immediately fall
29 exam-style questions on OCR GCSE Economics 3.6 Monetary policy, covering 3.6.1 What is monetary policy, 3.6.2 Monetary policy and macro objectives, and 3.6.3 Effects of monetary policy. Each one has a worked solution and a mark scheme showing where the marks go.