6 marksMonetary Theory and Policy
CAPE Economics Unit 2 · 2011 · Paper 2 · Question 3(a)
Describe three types of demand for money.
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Practise this questionOther parts of this question
- 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]
- 3(e)Analyse how changes in the money supply by the Central Bank can lead to inflation.[5 marks]
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