Economics (AS & A Level) · May / June 2022 · Paper 11 · Question 27

The central bank of an economy decides to raise interest rates in order to attract capital inflows and improve the financial account of the balance of payments. When is the central bank's decision least likely to be effective?

1. Awhen the currency of the economy is expected to lose its value
2. Bwhen the economy is politically and economically stable
3. Cwhen the interest rate of the economy is higher than that of other countries
4. Dwhen the reserves of foreign currencies held by the central bank are high and rising

As printed in the paper