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Economics (AS & A Level) · Oct / Nov 2024 · Paper 33 · Question 18

9708Monetary policy

A government decides to cut the rate of interest in order to stimulate aggregate demand and increase employment. Why might this policy not work in a recession?

  1. ABusiness confidence is low.
  2. BIt leads to deflation.
  3. CIt leads to an appreciation in the exchange rate.
  4. DIt leads to a decrease in the money supply.

As printed in the paper

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Correct answer: A. Business confidence is low.

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