Monetary policy — Paper 1 · IGCSE Economics (9-1) 0987

18 The government wishes to increase economic growth in its economy. What would not be likely to achieve this aim? A The central bank encourages bank lending. B The central bank lowers interest rates. C The government increases sales tax (VAT). D The government subsidises new industries.

1 marks

Answer: C

This question in 0987/11 May/June 2020

11 What can a central bank increase in order to reduce consumer borrowing? A commercial bank deposits B government spending C the exchange rate D the rate of interest

1 marks

Answer: D

This question in 0987/12 Oct/Nov 2020

22 An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving for income earners B investing more in building infrastructure C issuing more banknotes and coins D reducing indirect taxes

1 marks

Answer: A

This question in 0987/12 Oct/Nov 2020

17 Interest rates are sometimes raised to control inflation. Why might this policy be effective? A Consumers may save more. B Government spending may increase. C Investment may be encouraged. D The exchange rate may fall.

1 marks

Answer: A

This question in 0987/11 May/June 2021

17 A government uses expansionary monetary policy. What does the government decrease? A bank lending B interest rates C the budget deficit D the money supply

1 marks

Answer: B

This question in 0987/12 May/June 2021

23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest

1 marks

Answer: A

This question in 0987/12 Oct/Nov 2021

18 Why would an increase in the interest rate potentially lead to lower inflation? A Consumers will be more willing to save when interest rates are high. B Consumers will be more willing to spend when interest rates are high. C Producers will be more willing to borrow from banks when interest rates are high. D Producers will be more willing to invest when interest rates are high.

1 marks

Answer: A

This question in 0987/11 May/June 2022

18 A government wishes to pursue an expansionary monetary policy. What should it do? A discourage bank lending B give subsidies to firms C lower income tax thresholds D lower interest rates

1 marks

Answer: D

This question in 0987/12 May/June 2022

22 A country wishes to reduce the level of inflation. Which combination of policy measures will be most successful? policy measure 1 policy measure 2 A decrease exchange rates increase interest rates B decrease interest rates increase exchange rates C increase government spending decrease interest rates D increase interest rates decrease government spending

1 marks

Answer: D

This question in 0987/12 May/June 2022

13 The central bank of a country decreases interest rates to help the economy out of a recession. How is this decrease in interest rates most likely to affect the levels of saving in and borrowing from the country’s commercial banks? saving borrowing A decreases decreases B decreases increases C increases increases D increases decreases

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2022

18 A central bank reduces interest rates. What would not be a consequence of this action? A a benefit for borrowers receiving loans B a fall in the international value of the currency C a reduction in inflation D an increase in GDP

1 marks

Answer: C

This question in 0987/12 Oct/Nov 2022

12 A country’s central bank raised the rate of interest from 1% to 4% per year. How would this change have affected the amount saved and the cost of borrowing by individuals? amount cost of saved borrowing A decreased decreased B decreased increased C increased decreased D increased increased

1 marks

Answer: D

This question in 0987/11 May/June 2023

18 Government policy measures can affect economic activity in a country. Which pair of monetary policy measures would be likely to increase employment? A depreciate foreign exchange rates and increase education spending B increase money supply and reduce interest rates C provide subsidies and grants and lower sales tax D reduce income tax and improve infrastructure

1 marks

Answer: B

This question in 0987/11 May/June 2023

19 What would be most likely to encourage saving? A a rise in the exchange rate B a rise in the goods and services tax rate C a rise in the income tax rate D a rise in the interest rate

1 marks

Answer: D

This question in 0987/11 May/June 2023

19 What is likely to happen when the rate of interest increases? A consumer spending increases B firms buy fewer machines C people hold more cash D savers earn lower rewards

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2023

18 A government wishes to prevent deflation. Which combination of policies would be the most effective in achieving this aim? government interest rate spending A increase increase B increase reduce C reduce increase D reduce reduce

1 marks

Answer: C

This question in 0987/12 May/June 2024

23 The table shows changes in economic policies for four countries, A, B, C and D. Which country is most likely to be following a policy of preventing deflation? government money supply taxation spending A decreasing decreasing decreasing B decreasing decreasing increasing C increasing increasing decreasing D increasing increasing increasing

1 marks

Answer: C

This question in 0987/12 Oct/Nov 2024

11 If interest rates fall, what will be the most likely effect on saving and borrowing? saving borrowing A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 0987/11 May/June 2025

19 Monetary policy often involves a change in which variables? A government expenditure or taxes B interest rates or the money supply C labour market or trade union laws D tariffs or quotas

1 marks

Answer: B

This question in 0987/11 May/June 2025

17 Many central banks around the world decreased interest rates during a recession caused by a pandemic. What was the most likely macroeconomic aim of this policy? A economic growth B increase in the current account surplus C low inflation D redistribution of income

1 marks

Answer: A

This question in 0987/12 May/June 2025

20 What is the most likely result of a fall in interest rates? A a fall in inflation B a fall in investment C a rise in consumer spending D a rise in saving

1 marks

Answer: C

This question in 0987/12 Oct/Nov 2025