Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
    1. Monetary policy - introduction
    2. Interest rate determination and the role of a central bank
    3. Interest rate determination
    4. Case study
    5. Monetary policy and short term demand management
    6. The analogy of the balloon
    7. Interest rate changes & Aggregate Demand
    8. Monetary policy and inflation targeting
    9. Evaluation of monetary policy
    10. Case Study - The Credit Crunch
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

Evaluation of monetary policy

Syllabus: Evaluate the effectiveness of monetary policy through consideration of factors including:

• the independence of the central bank,
• the ability to adjust interest rates incrementally,
• the ability to implement changes in interest rates relatively quickly,
• time lags,
• limited effectiveness in increasing aggregate demand if the economy is in deep recession and conflict among government economic objectives.

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• Monetary policy - strengths and weaknesses

Essay Question

May 2014

3. (a) Explain how the aggregate demand curve can be shifted by a reduction in interest rates. [10 marks]

    (b) Evaluate the effectiveness of monetary policy to increase aggregate demand during a recession. [15 marks]

May 2010 TZ1

2. (a) Explain why a country may wish to reduce its rate of inflation. [10 marks]

    (b) Evaluate the likely impact on the economy of relying on higher interest rates to reduce the rate of inflation.
    [15 marks]