Demand Management: Monetary Policy (DP IB Economics: HL)

Text D, Paragraph 1
As economic uncertainties persist, central banks are considering the use of quantitative easing (QE) to inject liquidity into financial systems. There is ongoing debate among policymakers about its long-term effectiveness.

Define the term quantitative easing (QE) as indicated in (Text D, Paragraph 1).

Text B, Paragraph 2
Several nations have recently implemented interest rate hikes as part of their economic policy adjustments. These decisions have sparked widespread debate about their potential effects on the broader economy.

State two effects of an interest rate increase as found in (Text B, Paragraph 2).

Text C, Paragraph 2:
Governments around the world are considering expansionary measures to address sluggish growth. Some economists argue that expansionary monetary policies may have a positive impact on economic recovery in the coming years.

Outline one benefit of expansionary monetary policy as found in (Text C, Paragraph 2).

Text A, Paragraph 3
Several countries have adopted tighter monetary measures to combat inflation, but the impact of these policies remains uncertain. Observers are waiting to see how these adjustments will influence inflationary trends.

Describe how contractionary monetary policy can reduce inflation as found in (Text A, Paragraph 3).

Text C, Paragraph 3
Central bankers often refer to the real interest rate when discussing the true cost of borrowing. Policymakers are exploring how changes in real interest rates might affect financial markets.

Define the term real interest rate as indicated in bold (Text C, Paragraph 3).

Text E, Paragraph 3
In many nations, the objectives of monetary policy remain a subject of ongoing discussion, especially as governments strive for economic stability. Central banks are expected to outline their strategies in upcoming reports.

State two primary objectives of monetary policy as found in (Text E, Paragraph 3).