What will be the possible answers to these questions: (Question 20): Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left? A. An appreciation of the domestic currency B. A decrease in interest rates C. A rise in Government expenditure D. An increase in business confidence (Question 22): The monetary base is increased when? A. The central bank prints more money. B. The Government buys Treasury bills from the public. C. A citizen buys a newly issued corporate bond. D. A firm obtains an overdraft from a bank. (For Ques 22, Are A and B both possible?)
Q20: A - because, for example, an appreciation of the domestic currency will increase the foreign price of the country's exports. This should lead to a decrease in demand for these goods and hence export earnings and hence a decrease in aggregate demand Q22: The monetary base is defined in CT7 as the cash (notes and coins) in circulation outside the central bank. So I'd say the answer is B - the money that the government uses to buy T-Bills from the public will increase the monetary base. Printing of more money by the central bank could increase the notes and coins in circulation in future, but only if / when the government / central bank releases that money into the economy. So, I would say A isn't the answer. Hope that helps? Gresham
Hi So IAI released the mark scheme today and I am not able to understand the reasoning behind 2 of their solutions. Q25- the solution says option B is correct but I think it's option D. Q26- I am not getting option A by any calculations. Also Q35 part 2nd and 3rd I am not able to arrive at these figures Can anyone please explain?