What this practice covers
These questions are drawn from past IB Economics papers and filtered to monetary policy. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on monetary policy, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Confusing monetary policy (central bank, interest rates) with fiscal policy (government, tax and spending).
- Assuming rate cuts always boost AD, ignoring lags, confidence and the liquidity trap.
- Recommending monetary policy for cost-push inflation without qualification.
- Stating the outcome ("AD rises") without tracing the transmission mechanism that earns the analysis marks.
- Forgetting the exchange-rate channel, which is often the fastest-acting one.
- Working in nominal rates when the real rate is what drives behaviour.
- Describing QE as "printing money to give to the government" rather than as asset purchases that lower yields.
- Treating the effect as certain, when it depends on the multiplier and on spare capacity.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Monetary Policy revision notes.