Sample 1

IB Economics: Sample 1

(a) Explain two consequences of a central bank decreasing interest rates. [10]Student answerThe central bank of a country oversees the country’s financial system. It regulates the banking sector and set the country’s base interest rate. It is also responsible for managing monetary policy on behalf of the government. An example of a central bank is the Federal Reserve in the US.An interest rate represents the cost...

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