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Economics IGCSEPDF 88
118 pagesrevision 46932
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The main tool of
monetary policy is adjusting the
(the cost of
borrowing).
Impact ofRaising InterestRates
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Discuss the potential limitations of using
the macroeconomy.
policy, controlling the money supply, and
regulating the commercial banking sector.
Rises,
discouraging consumers and
firms from taking out loans.
Saving Reward: Rises,
encouraging consumers to
save more and spend less.
Overall,
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Analyse the effects of a decision by the Central Bank to significantly
Aggregate Demand (AD) and investment.
Question 4.3 (8 Marks)
on
as the main tool for managing
Falls,
encouraging greater
spending and investment.
Saving Reward: Falls,
encouraging consumers to
spend rather than save.
Effect on AD: Overall,
Aggregate Demand (AD)
rises (more Consumption
and Investment). This is used
to fight
recession/unemployment.
and identify the institution responsible for its implementation.
Notes: How Monetary Policy
Works
Solved Answers (Note Form)
Unsolved Past Paper Questions
Question 4.1 (4 Marks)
Explain the term Monetary Policy
Question 4.2 (6 Marks)
Effecton AD:
Aggregate Demand(AD)
Instrument:
Interest Rate
(Contractionary Policy):
○ Borrowing Cost:
interest rate changes
lower interest rates
falls (less Consumption and
Investment). This is used to
fight inflation.
Impact of Lowering Interest Rates
(Expansionary Policy):
○ BorrowingCost:
Q4.1: Monetary Policy Definition (4 Marks)