Practise applying interest rates, money supply and credit regulation to inflation or recession through AD/AS, then evaluating transmission, timing and alternative policy choices.
A government wants to use an expansionary monetary policy.
What should the government increase?
credit regulations
the exchange rate
the interest rate
the money supply
In recent years an economy has experienced changes in its price level as shown.
Which government policy is most effective in reversing the trend shown in the price level?
encourage firms to expand production through tax incentives
introduce an incomes policy to directly control wage increases
promote household savings by advertising saving schemes
reduce interest rates and increase money supply
What is an example of the use of monetary policy?
a cut in the rate of corporation tax
a reduction in interest rates
a switch from direct to indirect taxation
the introduction of maximum price controls to reduce inflation