IB Economics HL 3.5.6 Effectiveness of monetary policy Question Bank
Practise IB Economics SL/HL 3.5.6 by applying effectiveness of monetary policy concepts to exam-style questions.
- Syllabus
- First assessment 2022
- Course
- Economics HL
- Level
- HL
Practise IB Economics SL/HL 3.5.6 by applying effectiveness of monetary policy concepts to exam-style questions.
The information in Table 1 refers to Country A (base year: 2011).

Table 1
State one reason why monetary policy is considered to have limited effectiveness in increasing aggregate demand if an economy is in a deep recession.
Answers may include:
- Interest rates are already close to zero.
- Spending depends on confidence/indebtedness as well as interest rates.
- Money demand may be highly sensitive (elastic/flat) with respect to interest rates.
- Investment/consumption may not be sensitive to changes in interest rates.
Any other valid reason.
Marking guidance:
Award [1] for one possible reason.