IB Economics HL 3.5.2 Money creation and monetary tools Question Bank
Practise IB Economics HL 3.5.2 by applying money creation and monetary tools concepts to exam-style questions.
- Syllabus
- First assessment 2022
- Course
- Economics HL
- Level
- HL
Exam points
- identify the relevant model, concept or evidence
- apply the correct subject framework to the question
- evaluate the result using clear evidence and subject terminology
3.5.2 (HL)—Money creation and monetary tools question 1
Table 1 shows the gross domestic product (GDP) of the United States of America (USA) economy from 2020 to 2023. The USA is not the fastest growing economy in the world, but it is the largest. It also has the largest budget deficit and the largest current account deficit in the world. As a result, the actions of its central bank, the Federal Reserve, always make news.
Table 1
Question (a)
(a)
Explain how commercial banks create money.
To try and achieve the macroeconomic goals of monetary policy, the Federal Reserve significantly increased the money supply in the USA between 2008 and 2023. It also conducted four rounds of quantitative easing from 2008, totalling USD8900 billion.
[ 4 ]
Question (b)
(b)
Outline what is meant by the term quantitative easing.
[ 2 ]
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