Study monetary policy instruments in Pearson Edexcel A Level Economics through interest rates, quantitative easing, reserve requirements, money supply and aggregate demand.
In September 2024, The Central Bank of China (The People's Bank of China) reduced the reserve asset (liquidity) requirement by 0.5 percentage points from 6.6\%.
With reference to the data, explain what is meant by the reserve asset (liquidity) requirement.
Knowledge 2, Application 2
Quantitative skills Assessed:
QS9: Interpret, apply and analyse information in written, graphical and tabular forms.
Knowledge
Up to 2 marks for defining the reserve asset (liquidity) requirement, e.g.:
- The percentage of deposits that commercial banks must hold (1) rather than lending it out (1)
- Helps to control the money supply/interest rate (1)
Application
Up to 2 marks applying this to data, e.g.:
- The People's Bank of China reduced the reserve asset requirement (1) from 6.6\% by 0.5 percentage points (1) / Reserve asset requirement was reduced (1) to 6.1\% (1)
- Banks have more liquidity (1)
(4)