Quelpr
4 marksMonetary Theory and Policy

CAPE Economics Unit 2 · 2011 · Paper 2 · Question 3(c)

Explain how the Central Bank can use monetary policy to have a positive impact on aggregate demand.

The mark scheme is shown once you've answered.

Practise this question

Other parts of this question

  1. 3(a)Describe three types of demand for money.[6 marks]
  2. 3(b)(i)Define the reserve requirement (RR) as a tool of monetary policy.[2 marks]
  3. 3(b)(ii)Define open market operations (OMO) as a tool of monetary policy.[2 marks]
  4. 3(b)(iii)Define moral suasion (MS) as a tool of monetary policy.[2 marks]
  5. 3(d)(i)State the 'quantity theory of money'.[3 marks]
  6. 3(d)(ii)Identify the school of economics that advocates the use of the quantity theory.[1 mark]
  7. 3(e)Analyse how changes in the money supply by the Central Bank can lead to inflation.[5 marks]

More practice: the rest of this paper · more Monetary Theory and Policy questions · all CAPE Economics Unit 2 past papers