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Economics (AS & A Level) · May / June 2021 · Paper 31 · Question 18

9708Monetary policy

A government attempts to stimulate growth by cutting its main interest rate. What might reduce the effectiveness of this?

  1. Aif investors’ expectations are rising
  2. Bif more borrowing is taking place
  3. Cif savings are falling
  4. Dif the marginal propensity to consume is falling

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Correct answer: D. if the marginal propensity to consume is falling

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