OCR GCSE Economics - 3.6 - Monetary Policy

Which of these is the correct definition of monetary policy:

• A policy that aims to control the supply of money in the economy

• A policy that aims to achieve economic growth

• A policy that controls taxes

• A policy that aims to contribute to the supply of money

In order to achieve economic growth, monetary policy changes interest rates. Would these be increased or reduced?

• Increased

• Reduced

In order to achieve low unemployment, monetary policy changes interest rates. Would these be increased or reduced?

• Increased

• Reduced

In order to achieve price stability, monetary policy changes interest rates. Would these be increased or reduced?

• Increased

• Reduced

In order to achieve a healthier balance of payments, monetary policy changes interest rates. Would these be increased or reduced?

• Increased

• Reduced

Nominal interest rates are different from real interest rates because:

• Real interest rates are the current bank lending rates

• Real interest rates take into account inflation

• Real interest rates take into account changes in house prices

• Nominal rates are rates which only apply to borrowers and not lenders

Quantitative easing is the common name for which policy instrument?

• Lowering the interest rate at which commercial banks lend to each other

• Asset selling by a central bank

• Asset purchasing by a central bank

• When a central bank reduces interest rates

A significant rise in interest rates is most likely to lead to an increase in:

• Consumer spending

• Investment spending

• Unemployment

• Short run aggregate supply

Which of the following scenarios would cause the nation’s money supply to increase?

• Decreasing government spending

• Lowering interest rates

• Raising interest rates

• Selling bonds to investors

_________ is a general rise in prices that can be caused by a number of things, but one of them is the amount of money that circulates:

• Inflation

• Deflation

• Foreclosure