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QUESTION AND ANSWER

Interest rates and macroeconomic stability

The topic of monetary policy appears frequently within A-level assessments. Here, David Horner provides some guidance on how to tackle this topic in the exam

Percentage sign rests on a table.
© sommart/stock.adobe.com

Although there are other aspects to monetary policy, such as quantitative easing and control of the money supply, in the exam, the most likely area of focus will be the use of interest rates, particularly the effects of changes in interest rates on a macroeconomic variable. In longer, essay-style questions, the focus is likely to be on the use of interest rates in achieving one or more economic objectives.

In this article we will consider the following question:

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Previous

Exam-style questions: Questions on demerit goods

Next

How does tax affect the incentives to work?

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