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Practice Exam Questions

Analysis of Interest Rate Changes (MCQ Revision Questions)

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC
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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. 

Analysis of Interest Rate Changes (MCQ Revision Questions)

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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