Sample 3

IB Economics: Sample 3

(a) Explain two consequences of a central bank decreasing interest rates. [10]Student answerAn interest rate is the price of money. It is the cost of borrowing money from a bank and it is money a saver receives from having money in the bank. In Singapore banks the current interest rate is 3% which means some gets $3 for every $100 they have in the bank. A central bank is the institution that looks after the money system...

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