Monetary policy
5.3What the syllabus asks of you
- definition of monetary policy
- tools of monetary policy: interest rates, money supply and credit regulations
- distinction between expansionary and contractionary monetary policy
- AD/AS analysis of the impact of expansionary and contractionary monetary policy on the equilibrium national income and the level of real output, the price level and employment
Drill this topic
Every question on Monetary policy, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
45 questions
1May / June 2026 · Paper 11 · Q22Show mark scheme →
Aincrease quotas on imports
Blower interest rates
Craise income tax
Dset up training courses
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2May / June 2026 · Paper 12 · Q24Show mark scheme →
Areducing the budget deficit
Breducing the level of government spending
Creducing the money supply
Dreducing the rate of interest
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3May / June 2026 · Paper 13 · Q22Show mark scheme →
Acapital investment
Bcredit regulations
Cinterest rates
Dmoney supply
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4May / June 2026 · Paper 13 · Q25Show mark scheme →
AIf there is no monetary policy the AD curve will move to AD₂, but following the contractionary monetary policy the AD curve moves to AD₁.
BIf there is no monetary policy the AD curve will move to AD₂, but following the contractionary monetary policy the AD curve moves to AD₃.
CIf there is no monetary policy the AD curve will move to AD₃, but following the contractionary monetary policy the AD curve moves to AD₂.
DIf there is no monetary policy the AD curve will move to AD₃, but following the contractionary monetary policy the AD curve moves to AD₄.
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5May / June 2026 · Paper 14 · Q21Show mark scheme →
Aan increase in credit regulations
Ban increase in the exchange rate
Can increase in the interest rate
Dan increase in the money supply
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6May / June 2026 · Paper 14 · Q23Show mark scheme →
Acost of borrowing
Beconomic growth
Cemployment
Dprice level
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7May / June 2026 · Paper 32 · Q22Show mark scheme →
Aan appreciation of the country's currency
Ba decrease in consumption
Ca decrease in investment
Dan outflow of short-term capital
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8May / June 2026 · Paper 34 · Q22Show mark scheme →
Aa reduction in the interest rate at which it will lend to banks
Ba reduction in the minimum cash to deposit ratios of banks
Cthe purchase of foreign currency to influence the country's exchange rate
Dthe sale of government bonds in the open market
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9Oct / Nov 2025 · Paper 12 · Q19Show mark scheme →
Aincreasing the rate of interest to reduce consumer spending
Bmanaging a reduction of the money supply
Cusing credit restrictions to regulate lending by commercial banks to households
Drestricting wage increases in the private and public sectors
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10Oct / Nov 2025 · Paper 12 · Q21Show mark scheme →
Athe central bank increasing the money supply
Bthe central bank causing an appreciation of the country’s foreign exchange rate
Cthe central bank increasing controls on credit lending
Dthe central bank increasing the minimum lending rate of interest
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11Oct / Nov 2025 · Paper 12 · Q22Show mark scheme →
Ainterest rate falls; AD curve shifts left
Binterest rate rises; AD curve shifts left
Cinterest rate falls; AD curve shifts right
Dinterest rate rises; AD curve shifts right
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12Oct / Nov 2025 · Paper 12 · Q23Show mark scheme →
Aan increase in government expenditure on training
Ban increase in indirect taxes on demerit goods
Can increase in import tariffs
Dan increase in interest rates
Mark scheme
13Oct / Nov 2025 · Paper 14 · Q25Show mark scheme →
Acontractionary fiscal policy
Bcontractionary monetary policy
Cexpansionary monetary policy
Drestrictive supply-side policy
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14May / June 2025 · Paper 11 · Q21Show mark scheme →
Aa rise in import tariffs on manufactured goods
Ba rise in interest rates by the central bank
Ca rise in credit regulations
Da rise in the money supply
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15May / June 2025 · Paper 11 · Q23Show mark scheme →
Areal GDP falling; price level rising; unemployment falling
Breal GDP rising; price level rising; unemployment rising
Creal GDP rising; price level rising; unemployment falling
Dreal GDP rising; price level falling; unemployment rising
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16May / June 2025 · Paper 12 · Q21Show mark scheme →
Aa decrease in the availability of credit
Ba decrease in the exchange rate
Can increase in government spending
Dan increase in subsidies for training
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17May / June 2025 · Paper 13 · Q21Show mark scheme →
Abudget surplus
Binterest rate
Cmoney supply
Drates of taxation
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18May / June 2025 · Paper 13 · Q25Show mark scheme →
Aaggregate demand may fall
Baggregate supply may fall
Csaving may fall
Dthe exchange rate may fall
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19May / June 2025 · Paper 31 · Q19Show mark scheme →
Aa higher rate of consumer price inflation
Ba rapid growth in gross domestic product
Can increase in investment by manufacturers and real estate developers
Da reduction in borrowing by consumers
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20May / June 2025 · Paper 33 · Q19Show mark scheme →
Aa higher rate of consumer price inflation
Ba rapid growth in gross domestic product
Can increase in investment by manufacturers and real estate developers
Da reduction in borrowing by consumers
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21Feb / March 2025 · Paper 12 · Q23Show mark scheme →
Acontractionary fiscal policy
Bcontractionary monetary policy
Cexpansionary fiscal policy
Dexpansionary monetary policy
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22Oct / Nov 2024 · Paper 11 · Q23Show mark scheme →
Abelow the PPC, high
Bbelow the PPC, low
Con the PPC, high
Don the PPC, low
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23Oct / Nov 2024 · Paper 13 · Q20Show mark scheme →
Aborrowing by firms
Bconsumer spending
Cimport prices
Dexport prices
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24Oct / Nov 2024 · Paper 33 · Q18Show mark scheme →
ABusiness confidence is low.
BIt leads to deflation.
CIt leads to an appreciation in the exchange rate.
DIt leads to a decrease in the money supply.
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25Oct / Nov 2024 · Paper 33 · Q20Show mark scheme →
Aby decreasing the borrowing costs of business
Bby decreasing the government's budget deficit
Cby increasing the foreign exchange rate of the currency
Dby increasing the opportunity cost of spending
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26May / June 2024 · Paper 11 · Q20Show mark scheme →
Aa higher cost of borrowing
Ban increase in aggregate demand
Can appreciation of the exchange rate
Dan increase in government debt
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27Feb / March 2024 · Paper 32 · Q23Show mark scheme →
Aa depreciation of the country's currency
Ba fall in the level of savings
Ca reduction in economic growth
Da reduction in unemployment
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28Oct / Nov 2023 · Paper 11 · Q29Show mark scheme →
Aincreased credit availability, interest rates up, money supply reduced
Bincreased credit availability, interest rates down, money supply increased
Creduced credit availability, interest rates up, money supply increased
Dreduced credit availability, interest rates down, money supply reduced
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29Oct / Nov 2023 · Paper 13 · Q26Show mark scheme →
Amoney supply: increase; rate of interest: increase
Bmoney supply: decrease; rate of interest: increase
Cmoney supply: increase; rate of interest: decrease
Dmoney supply: decrease; rate of interest: decrease
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30Oct / Nov 2023 · Paper 13 · Q30Show mark scheme →
Acredit regulations
Bthe exchange rate
Cthe interest rate
Dthe money supply
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31May / June 2023 · Paper 12 · Q27Show mark scheme →
Aa fall in investment and a fall in inflation
Ba fall in investment and a rise in inflation
Ca rise in investment and a fall in inflation
Da rise in investment and a rise in inflation
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32Feb / March 2023 · Paper 32 · Q22Show mark scheme →
Alow unemployment level
Bmore equal income distribution
Cstable exchange rate
Dsteady price level
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33Oct / Nov 2022 · Paper 32 · Q25Show mark scheme →
AEconomies are naturally unstable.
BPolicy makers should follow set rules targeting the money supply.
CThe aggregate supply curve has a slight slope.
DWage movements are 'sticky' downwards.
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34May / June 2022 · Paper 11 · Q29Show mark scheme →
ABanks will lend more.
BConsumers will have higher disposable income.
CConsumers will pay more tax.
DConsumers will save more.
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35May / June 2022 · Paper 32 · Q30Show mark scheme →
Adecrease; decrease; increase
Bdecrease; increase; increase
Cincrease; decrease; increase
Dincrease; increase; decrease
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36Feb / March 2022 · Paper 12 · Q29Show mark scheme →
Athe budget deficit
Bthe budget surplus
Cthe interest rate
Dthe money supply
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37Feb / March 2022 · Paper 12 · Q30Show mark scheme →
Aallowing the rate of interest to fluctuate and increasing business taxation
Bincreasing the budget surplus and raising tariffs on imports
Ckeeping the rate of interest very low and increasing the money supply
Draising the rate of interest and restricting the money supply
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38Oct / Nov 2021 · Paper 12 · Q29Show mark scheme →
AAggregate supply is increasing faster than aggregate demand.
BConsumers expect prices to rise even faster in the future.
CConsumers’ spending is largely paid for on credit.
DInterest rates are still higher abroad.
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39Oct / Nov 2021 · Paper 13 · Q28Show mark scheme →
Aa cut in the rate of corporation tax
Ba reduction in interest rates
Ca switch from direct to indirect taxation
Dthe introduction of maximum price controls to reduce inflation
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40Oct / Nov 2021 · Paper 33 · Q30Show mark scheme →
Aan appreciation of the currency, together with an increase in the rate of interest
Bincreased government expenditure on education, together with an increase in taxes to pay for it
Cincreased indirect taxes, together with a depreciation in the exchange rate
Dreduced income taxes, together with a cut in the rate of interest
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41May / June 2021 · Paper 12 · Q30Show mark scheme →
Aincreasing income tax
Breducing government spending
Creducing interest rates
Dremoving subsidies
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42May / June 2021 · Paper 13 · Q27Show mark scheme →
Aincreasing the government's budget surplus
Bincreasing borrowing by assisting banks to lend more
Cinvesting in long-term projects to improve transport networks
Dswitching the burden of taxation from earning to spending
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43May / June 2021 · Paper 13 · Q30Show mark scheme →
AW and X
BX and Y
CY and Z
DZ and W
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44May / June 2021 · Paper 31 · Q18Show mark scheme →
Aif investors’ expectations are rising
Bif more borrowing is taking place
Cif savings are falling
Dif the marginal propensity to consume is falling
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45May / June 2021 · Paper 33 · Q18Show mark scheme →
Aif investors’ expectations are rising
Bif more borrowing is taking place
Cif savings are falling
Dif the marginal propensity to consume is falling
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