Unit 3: Macroeconomics
Topic 3.5: Demand Management — Monetary Policy Questions
Practice 20 exam-style questions for IB Economics Topic 3.5. Review the question stems below, then unlock the full Question Bank to access markschemes, model answers, and AI grading.
1Calculate1 mark
2026
Calculate the real interest rate.
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**Monetary policy** in Maribel was eased during a recession.
Define the term **monetary policy**.
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Orlan's central bank announced it would continue **quantitative easing** for another year.
Outline what is meant by the term quantitative easing.
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The primary objective of most central banks is to:
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A decrease in interest rates is likely to lead to:
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Kessland's central bank uses **monetary policy** to keep inflation near 2%.
Define the term **monetary policy**.
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A text explains that Corvane’s central bank tightened monetary policy to curb inflation.
Define the term monetary policy.
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Vennland's central bank tightened **monetary policy** to slow inflation.
Define the term **monetary policy**.
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**Monetary policy** in Sarnia has supported growth since 2023.
Define the term **monetary policy**.
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Vennland's central bank began a programme of **quantitative easing** after cutting its interest rate to 0.1%.
Outline what is meant by the term quantitative easing.
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Define the term monetary policy.
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When the central bank raises the base interest rate, the intended effect is to:
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Lower interest rates may affect the exchange rate by:
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2026
Sketch an AD/AS diagram showing expansionary monetary policy closing a deflationary gap.
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Calculate the real interest rate on a one-year bank deposit in Vennland.
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Table 1 shows Corvane’s interest rate and inflation rate in 2025.
Using information from Table 1, calculate Corvane’s real interest rate in 2025.
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Sketch an AD/AS diagram to show the likely effect on Sarnia’s price level of the interest rate rises described in the text.
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Table 1 shows Sarnia’s interest rate and inflation rate in 2025.
Using information from Table 1, calculate Sarnia’s real interest rate in 2025.
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Explain why contractionary monetary policy may conflict with other economic objectives.
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2026
Sketch an AD/AS diagram to show how slower growth of the money supply may affect the inflation rate in Belmare.
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