Text A, Paragraph 1
In response to the recent economic slowdown, central banks across Europe have been adjusting monetary policy to stabilise markets. There is widespread debate on the best course of action for controlling inflation and encouraging investment.
Define the term monetary policy as indicated in bold (Text A, Paragraph 1).
How did you do?
Did this page help you?
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).
How did you do?
Did this page help you?
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).
How did you do?
Did this page help you?
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).
How did you do?
Did this page help you?
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).
How did you do?
Did this page help you?
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).
How did you do?
Did this page help you?
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).
How did you do?
Did this page help you?
Extract B, Paragraph 2
The Bank of Thailand faces multiple challenges as it navigates the post-pandemic economy. While GDP growth has rebounded to 3.2%, inflation remains persistently high at 5.4%, well above the bank's target range of 1-3%. The manufacturing sector has reported declining orders, and unemployment has risen to 4.2%. The central bank committee is meeting next week to review its policy stance, with markets expecting significant changes to help achieve multiple macroeconomic objectives.
Using an AD/AS diagram, explain how monetary policy decisions by the Bank of Thailand might involve a trade-off between different macroeconomic objectives.
How did you do?
Did this page help you?
Extract C, Paragraph 3
The Central Bank of Kenya (CBK) has maintained its independence from government influence despite growing pressure to support increased government borrowing. Recent data shows public debt reaching 67% of GDP, with the government seeking to fund ambitious infrastructure projects. The CBK's mandate focuses on price stability and financial system stability, but some politicians argue it should prioritise supporting economic growth through lower interest rates.
Explain how central bank independence in Kenya might help achieve the goals of monetary policy.
How did you do?
Did this page help you?
Extract A, Paragraph 2
Norway's central bank has raised its base rate of interest by 50 basis points to 4.5%. Following this decision, local media reported increases in mortgage rates, credit card rates, and business loan rates across all major Norwegian banks. Car dealerships report a 15% drop in finance applications, while property agents note declining mortgage enquiries.
Explain how changes in Norway's base rate of interest transmit through its economy.
How did you do?
Did this page help you?
Extract D, Paragraph 1
Despite the Bank of South Korea cutting its base rate of interest to a historic low of 0.25%, economic recovery remains sluggish. Consumer spending has fallen by 8% year-on-year while business investment continues to decline. Survey data shows consumer confidence at its lowest level in a decade, and businesses report reluctance to borrow despite the extremely low interest rates. The central bank governor acknowledges that further rate cuts may have a limited impact on stimulating economic activity.
Using an AD/AS diagram, explain why monetary policy tools in South Korea might become less effective in stimulating economic recovery.
How did you do?
Did this page help you?
Extract B, Paragraph 1
The Swiss National Bank (SNB) has announced two major policy changes: raising the base rate from 1.5% to 2%, while simultaneously reducing reserve requirements for commercial banks from 15% to 10%. The central bank governor states this combination aims to control inflation while ensuring banks can maintain lending to key sectors. Commercial banks have expressed uncertainty about how to respond to these seemingly contradictory signals.
Explain how the combination of a higher base rate and lower reserve requirements might affect commercial bank lending in Switzerland.
How did you do?
Did this page help you?
Extract B, paragraph 2
The Bank of Japan (BOJ) has announced plans to implement new monetary policy measures in response to persistent deflationary pressures. The central bank is considering increasing the required reserve ratio from 8% to 10% for commercial banks. Additionally, under a separate initiative, the BOJ has committed to creating ¥20 trillion in new electronic reserves to purchase government bonds from financial institutions. Commercial banks are preparing to adjust their operations in response to these different policy tools.
Explain the difference between the required reserve ratio and quantitative easing as tools of monetary policy in Japan.
How did you do?
Did this page help you?