monetary policy questions and answers

It is not observable. Updated 1 day ago|11/26/2020 8:45:02 AM. When economies grow, well-being generally increases. Describe the three tools available to the Fed for controlling the money supply. Identify what will … For many years, the RBA practice was to make an announcement only when the interest rate was changed. a. (a) Explain the factors which might be responsible for causing consumer spending to fall. On August 1, 2016, Colombo Co.'s treasurer signed a note promising to pay $480,000 on December 31, 2016. 100% Plagiarism Free. Explain. In the United States, the Federal Reserve (specifically the Federal Open Market Committee) sets the policy rate, or Federal Funds Rate. b) buys government bonds. I emphasize three words in this sentence, each for a different reason. Explain the pros and cons of each. What does this model show? SURVEY . In accordance with the Federal Constitution and the National Bank Act (NBA), the SNB has the mandate to conduct its monetary policy in such a way that money preserves its value and the Swiss economy can develop in an appropriate manner. Which of the following options is correct? Why does the exchange rate overshoot in response to a permanent monetary expansion? At the same time, to preserve the stability of the global financial system and support the global economy, central banks across the globe have taken unprecedented monetary measures—amounting to about $7.5 trillion and $150 billion (14 percent and 3.6 percent of GDP) for the major advanced countries and emerging market economies respectively, as estimated in the October … Downloadable! What is the maximum you can consume in each period? b. What... How does a change in the cash rate of the central bank affect the yields of a bond in the same country? Explain how monetary policy attempts to resolve economic disequilibria by discussing the roles of each of the institutions of the Federal Reserve System. Edit. Compared to contractionary fiscal policies, adopted to counter inflation, tight money policies, adopted by the Federal Reserve will result in: a. less public spending. a. purchase; an increase b. sa... How can fiscal, monetary, and exchange rate policies be used to stimulate and sustain economic growth in Africa? Questions (38) Publications (8,634) Questions related to Monetary Theory. Should they rise or decrease the interest rates? Monetary policy: some questions and answers (PDF 292.2 KB) Latest Publications. Why or why not? Expert Answer . In January of 2019, GDP growth rate in the USA was 2.2% unemployment rate was 3.8% as of March 2019, and inflation rate was 1.5% in February of 2019. The U.S. financial system is composed of: (1) policy makers, (2) a monetary system, (3) financial institutions, and (4) financial markets. Reserves more than doubled and the M1 money supply increased even more rapidly, b. Before the financial crisis, if the Fed wanted to lower the federal funds rate, it would: a) sell government securities in the open market. Release date. … DRAFT. traded and a non-traded sector in each country, optimal independent monetary policy cannot. In the short-run, the economic variable(s) that the Federal Reserve has significant effect on is (are): A) inflation. The Fed lowers the federal funds rate. In an open economy, changes in monetary policy affect both interest rates and exchange rates. b. have no effect on imports. What is the Australian government's fiscal policy stance in the current phase of the business cycle? b. currency, near-money, and remove ratio. b. government spending. All other trademarks and copyrights are the property of their respective owners. Is expansionary monetary policy a source of long-run economic growth? Who determines U.S. monetary policy? Monetary Policy relates to the policies employed by a central bank, currency board or other regulatory committee that affect the cost and supply of money and the policies largely fit into two categories: ‘conventional’ and ‘unconventional’ monetary policy. An expansionary or loose monetary policy: (More than one answer) a) lowers interest rates. It said, that consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap and accordingly decided to reduce the policy repo rate by 25 basis points. 99) obliges the SNB, … Which of the following choices is the most likely cause? c) The congress and the president. c. banks held more reserves. Your IP: 139.59.164.196 Which of the following describes an expansionary monetary policy? Question 1 . C. maturing government debt. [15 … a. setting the discount rate b. acting as a lender of last resort c. open market operations d. setting the required reserve ratio. With a reserve requirement of 5% and required reserves of $10,000, a bank has a total of which of the following? Explain what is meant by interest elasticity. Is the Federal Reserve implementing expansionary or contractionary monetary policy? b. from dues paid to it by member banks. The discount rate is the interest rate on loans that the Federal Reserve makes to banks. (a) Either could choose more schooling. 1. (4). Latest Monetary Policy assignment questions answered by industry experts. "Neither monetary policy nor fiscal policy alone can be effective in formulating sound economic policies for recession." Why or why not? At its peak in 1981, the federal funds interest rate was just over _____. November 1985. How could a bank earn easy profits? c) expansionary. Reserve Bank of New Zealand. Will the increase in money growth change? B. Real GDP will decrease. What policy mix of monetary and fiscal policy is needed to meet the objectives given here? A. What is your conclusion, should policymakers use the monetary and or fiscal policy to stimulate aggregate demand? So I had to be both selective and judgmental in compiling my list, else this paper would have been even longer than it is. About the Fed; History Structure & Functions When reserve requirements are increased, the: (group of answer choices) a. d. nominal interest rate. Get Answer Now! Challenges for monetary policy The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy. i) They are both intended to reduce economic fluctuations. When the Fed engages in easy (expansionary) money policy, its intent is to: a. raise spending by increasing bank reserves b. lower spending by decreasing bank reserves c. raise spending by decreasi... What are two possible failures of monetary policy in the Keynesian transmission mechanism in terms of liquidity trap and vertical investment schedule? Monetary neutrality refers to the fact that changes in the money supply: a. affect output more in the long run than in the short run. Edit. Monetary Policy increases the money supply by buying bonds in order to increase interest rates. If the Federal Funds rate is 6% and the discount rate is 5.1%, to whom will a bank be more likely to go for a loan, another bank or the Fed? Why is i... Expansionary monetary and fiscal policies are used by policymakers in a recession to _____. If it wants to lower inflation, then A. expansionary monetary policy will be effective. B) cut taxes across the board. Suppose that foreigners start holding more U.S. currency. Quiz - Monetary Policy. The interest rate individuals pay when they take out a loan from a bank or financial institution. A) The discount rate. b. B. the last resort loan, which means that... a. Edit. Please write your answers in the space below each question. Q. Which of the following is true? c. What is a "retention pond", why and when was it formed? What is the opportunity set? Which of the following is not a monetary policy goal: a. B. b. necessarily expands the size of government. 30 seconds . Highlight the years that inflation was either higher or lower than usual and state t... Decreasing taxes is intended to __ the national economy A. As a result, when the Bank of Canada sets its interest rate the size of the money supp... How is federal funds rate related to the interest rate that we paid for our auto, student, or mortgage loan? a. Why? Monetary policy Questions and answers on monetary policy. Part I, the longest part of the paper, takes up five critical questions regarding the institutional designof the monetary policy authority: 1. by canuck1966. Why did the Fed create Reverse Repo Facility? As a tool of monetary policy, the reserve requirement is problematic because: A. How will the Federal Reserve's changes to monetary policy impact the condition of the U.S. economy? Draw a diagram to show why this policy will ultimately result in a higher aggregate price le... How can monetary policies created by a central bank affect financial markets and financial institutions? B. falling wages and prices. D. all of the above are true. When was the first time the RBA announced a decision not to change the cash rate? Congress B. 00 (three hours) Important. What is monetary policy? The Fed lowers the federal funds rate. 5 Extension Activity (advanced students) Read the following excerpts. c. exports. C. called monetary policy. Answer FIVE of the following six questions. Comparing the United States and Switzerland, in which country would monetary policy have a more signifi... By lending to commercial banks through the discount window, the Federal Reserve alters (currency in circulation, the discount rate, borrowed reserves, prices of government securities, or non-borrow... Should the Reserve Bank of Australia (RBA) take into account housing prices when making monetary policy decisions? St. Louis Fed President James Bullard addressed three questions concerning U.S. monetary policy and income inequality during a Council on Foreign Relations event, June 26, 2014. If the Fed conducts open market purchases, then which quantities increases? C. increased real GDP. According to Classical analysis, an economy in a recession can return to full employment through: A. rising wages and prices. cutting government spending. Author. Missed a question here and there? b. Explain your stance on Quantitative Easing. a. B. the federal budget is balanced. A. Decreases aggregate demand so that the price level falls. 1. Get help with your Monetary policy homework. D. decreased consumer spending. B. called counter cyclical policy. Which of the following combinations of economic policy objectives is most likely to lead to a financial crisis? A floating exchange rate; setting your own interest rate; restricting and limitin... A liquidity trap occurs when expansionary monetary policy fails to work because an increase in bank reserves by the Fed does not lead to an increase in bank lending. The Riksbank has interpreted this objective to mean a low, stable rate of inflation Questions and answers on monetary policy. 48 Questions Show answers. You hear on the radio that the Federal Reserve decided to take action to increase the federal funds rate sharply by 2 percentage points. The three monetary policy tools include all of the following except: a) Quantitative easing b) Open market operation c) Federal Reserve requirement ratio d) Discount rate. Describe how the government uses each policy if the economy is too hot and inflation is rising rapidly. a. Stock Market. A. Expansionary policy would only worsen the recession... Monetary tools of the Federal Reserve do not include which of the following choices? No. The additional investment choice of foreign assets B. If the Federal Reserve sells securities on the open market, how are the purchases of U.S. financial assets by foreigners and the international value of the dollar impacted? Below are some of the most pressing questions and answers on the topic. Study Flashcards On Economics Exam 2 - Monetary Policy, Money, Inflation at Cram.com. ... Q. Which of the following would be considered contractionary monetary policy? Discuss the trends of inflation rates over the past 10 years and their relationship with GDP growth and decline. Save. In practice, however, there are obstacles to the use of such policies. As of 13 June 2019, the … a. 2. Federal reserve requirement ratio c. Discount rate d. Quantitative easing. What are the limits of monetary and exchange rate policy? Suppose the Federal Reserve raises the discount rate and the target federal funds rate, and as a result, decision makers anticipate a lower future rate of inflation. The quantity of money and supply of loanable funds _____. b. It's not like Feds will forcefully demand banks to buy bonds. (3). This problem has been solved! canuck1966. Candidates should allow ten minutes for careful reading to ensure that they understand the questions and make appropriate choices in Section B. A. Monetary Policy Statement November 2020; Progressing Climate Action by Driving Transformational Change; Monetary policy and regional … How was fiscal and monetary policy used to reduce the recessionary gap during the last recession? (2) cannot be done, unless there is a party (Central Bank) wanting to purchase those bonds. b. a reduction in the interest banks receive on their reserves. Briefly explain who borrows money and who lend money at this "target interest rate". Fiscal Policy & Monetary Policy Chapter Exam Instructions. The long-term real interest rate _____. Give an example of a concurrent timing control method to the Food and Beverage Sector. A. c. the rate banks charge each other to borrow money. a year ago. B. Monetary Policy Statement November 2020; b. 60 seconds . SARON is the most representative of these rates today. Bank A has an increase in deposits (or excess reserves) of $100M and the reserve requirement is 10% with other banks not holding reserves beyond the requirement. Ans: d) Answer Explanation: Central Bank is following a tight money policy. d) passive. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Which do you think is mor... What is the difference between contractionary and expansionary monetary policy? The Government of India, in consultation with RBI, notified the ‘Inflation Target’ in the Gazette of India dated 5 August 2016 for the period beginning from the date of publication of the notification and ending on March 31, 2021, as 4%. Downloadable! If the Federal Reserve had its restrictions limited to the monetary policy how would that effect the economic markets if congress was to approve a drastic measure? Name at least one action that the Fed could take to reduce the money supply and raise interest rates. In constant increases in the money supply and balanced federal budgets. what is the purpose of Monetary Policy? Advocates of "fixed policy rules" believe: A. Authors: Norbert Michel and William Beach. answer choices . Explain. One of these will be to strengthen an already strong dollar. $250,000 c. $350,000 d. $1,700,000. b. the United States is experiencing severe inflation. May 2011 TZ1. How do inside lags and outside lags affect monetary policy? cutting production of consumer goods. If the next chair of the Federal Reserve Board has a reputation for advocating an even slower rate of money growth than the current chair, what will happen to interest rates? Some have argued that the BOJ (Bank of Japan) was not aggressive enough in cutting interest rates. This year, technology causes our aggregate supply to increase. c. affect only out... International financial transactions are most likely to affect the U.S. monetary base when a. the United States is in recession. C) The prime rate. a year ago. You are allowed two attempts Use references. Policy indicates that I have restricted myself to issues … B. increase the rate of growth of real GDP. If most countries adhered to a system of fixed exchange rates, global inflation would be lower. A) Define the term monetary policy tools. What is the difference between American and European terms for quoting currencies? Which policy is a more effective monetary policy or fiscal policy? d. All of the above. What would you expect to happen to aggregate demand in the U.S.? The government passes a universal tax credit to stimulate consumer spending during an economic downturn. b) Buy government securities through open market operations. Explain the pros and cons of each policy. © copyright 2003-2020 Study.com. Cloudflare Ray ID: 5fbf797938b0d21c And how Australia can survive without a stable exchange rate? Increasing the reserve ratio C. Buying government securities... How would (expansionary or contractionary) fiscal policy and monetary policy affect the current account exports and imports in goods and services and the exchange rate, respectively? Monetary Policy DRAFT. What are the causes and the effects of low policy rates? 2.5 Monetary Policy (questions) Past Paper Essay Question. How should it conduct open market operati... How will the gradual rise of the discount rate by the Federal Reserve affect international business? Indicate whether each scenario is an example of a recognition lag, implementation lag, or impact lag. Answer with special attention to the Taylor Rule. In the United States stabilizing fiscal policy is decided on by: a) The Federal Reserve System. When RBI increases the bank rate, the cost of borrowing for banks rises and this credit volume gets reduced leading to decline in supply of money. b. lowers interest rates, causing aggregate demand to shift to the left. The Fed lowers the federal funds rate. What tool of monetary policy will the Fed use to increase the federal funds rate from 1 percent to 1.25 percent? If a bank borrows $550,000 from the FED on Friday and repays it on Monday, show how it should be written on a T-account for this transaction. Quiz; Quiz-monetary-policy; Test your knowledge with a quiz. Question Status: New 11) Of the three policy tools that the Fed can use to change the money supply, the one that does not affect the monetary base is (a) open market operations. Do you agree or disagree with this statement? How does the current system differ from the system that was in place prior to August 1971? Suppose an economist has a bright idea: a central bank should lean against the wind when output falls but not when it rises. Projecting that it might temporarily fall short of legally required reserves in the coming days, the Bank of Beano decides to borrow money from its regional Federal Reserve Bank. All rights reserved. The format and structure of the examination may change in future years,and any such changes will be publicised on the virtual learning environment (VLE). In a two-country world with a . Assume the borrowing rate is 10% and the lending rate is 5%. Assume the economy is in a deep recession. c. The Fed increases the reserve ratio. The tools of monetary policy include open market operations, the discount rate, and the reserve … B) What is the usual purpose of these funds? Monetary policy: some questions and answers (PDF 292.2 KB) Latest Publications. Central bank is following a tight money policy. d) increases the required reserve ratio. a. b. Reduction in the required reserve ratio, II. a. What are the pros and cons of using expansionary and contractionary monetary policy tools under the following scenarios; depression, recession, and robust economic growth? A. Provide feedback. If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. answer choices … This includes the material we covered in Chapters 10, 11, 12, and 14. Why or why not? Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. It raises questions related to monetary policy, central banking operations, and payment systems—as well as financial stability and legal foundations and regulation. The Monetary Policy Committee is entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. This site is a product of the Federal Reserve. a. Fill in either rise/fall or increase/decrease. Explain your reasoning. (b) changes in the discount rate. C. expansionary monetary policy. If we put away $1,000 today, what will it be worth in 1 year at 10%? B) output. B. increases reserve holdings of commercial banks. b. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. An increase in government spending in the short term lowers unemployment and increases GDP. Describe how they use the three tools, reserve requirements, open market operations (Federal Fund rates), and Discount Rates. 68% average accuracy. For each of these statements, identify if they are true or false and explain why. a) Increases the discount rate. Which of the following is a rationale for applying a discount rate? a. contractionary b. expansionary c. both a and b d. none of the above. The SNB policy rate is the third element of the SNB's monetary policy strategy in addition to the definition of price stability and the conditional inflation forecast (Questions and answers on monetary policy strategy).The SNB seeks to keep the secured short-term Swiss franc money market rates close to the SNB policy rate. The exam consists of 5 parts. d) 17.41%. B. tax reductions and open market purchases. What happens when discount rate is raised? When the Fed raises the target for the federal funds rate, it: a) lowers the discount rate. If the FED decides to continue the process of raising interest rates, what is the likely response of firms and households to the increased cost of borrowing? Answer: D Question … Increasing the discount rate B. Which one of the following statements about the interest-rate effect is correct? Edit. Monetary policy is the process by which the monetary authority of a country controls the supply of money, ... questions and answers on my Research Gate profile. c. worsen the balance of trade. Would investment (I) change? Usually, the MPC meets six times a year. How do monetary policies, implemented by government, affect interest rates? A decrease in the money supply causes: a) a long-run decrease in the level of output.

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