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CAIE A-Level Economics 5.3.2 Monetary Policy Tools

Practise identifying interest-rate, money-supply and credit-regulation changes and explaining how central-bank decisions affect borrowing, spending, inflation and employment.

Syllabus
2026–2028
Course
Economics 9708
Level
AS

Exam points

  • identify policy rates, money supply and credit regulations while excluding fiscal or wage tools
  • compare interest and inflation data using direction and proportional change rather than levels alone
  • explain how cheaper credit raises consumption or investment and can reduce cyclical unemployment

5.3.2—Monetary policy tools question 1

[Maximum number: 1]

A central bank is asked by the government to help achieve price stability.

If inflation rises steeply, which policy will not be directly within the control of the central bank?

A

increasing the rate of interest to reduce consumer spending

B

managing a reduction of the money supply

C

using credit restrictions to regulate lending by commercial banks to households

D

restricting wage increases in the private and public sectors

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