5 marksMonetary Theory and Policy
CAPE Economics Unit 2 · 2011 · Paper 2 · Question 3(e)
Analyse how changes in the money supply by the Central Bank can lead to inflation.
The mark scheme is shown once you've answered.
Practise this questionOther parts of this question
- 3(a)Describe three types of demand for money.[6 marks]
- 3(b)(i)Define the reserve requirement (RR) as a tool of monetary policy.[2 marks]
- 3(b)(ii)Define open market operations (OMO) as a tool of monetary policy.[2 marks]
- 3(b)(iii)Define moral suasion (MS) as a tool of monetary policy.[2 marks]
- 3(c)Explain how the Central Bank can use monetary policy to have a positive impact on aggregate demand.[4 marks]
- 3(d)(i)State the 'quantity theory of money'.[3 marks]
- 3(d)(ii)Identify the school of economics that advocates the use of the quantity theory.[1 mark]
More practice: the rest of this paper · more Monetary Theory and Policy questions · all CAPE Economics Unit 2 past papers