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Analysis of Interest Rate Changes (MCQ Revision Questions)
- Level:
- AS, A Level, IB
- Board:
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 12 Jun 2017
This this revision video you get the chance to have a go at three multiple choice questions each of which tests your understanding about the likely effects of changes in monetary policy.
Question 1 Reasoning:
Impact of government sale of bonds to the commercial banks
- Sale of government bonds e.g. to the commercial banks
- Banks pay for the bonds with cash
- This reduces the liquidity of the banking system
- Makes commercial banks less able to lend out to borrowers
- Squeezes the supply of credit
- I.e. a contractionary monetary policy
- This is the opposite of quantitative easing
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