monetary policy questions and answers

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. a. Describe the process of money creation by the banking system and the role of the central bank. Reference. a. c) expansionary. Q: Refer to Table 10.4. The three main monetary policy are: a. interest rate, taxes, and government purchases. What would be some risks of having the government directly involved in monetary policy? Multiple choice format with a difficulty level of medium. Fill in either rise/fall or increase/decrease. Excess reserves of commercial banks will increase, c. U.S. Treasu... Do you agree that easier monetary policies won't boost markets much longer? But, in FY20, it had an extra … B. What is the difference between Fiscal and Monetary policy? Increasing the discount rate B. b. Activists hold that: a. activist monetary policy is flexible. C. Reserve requirements. Who determines U.S. monetary policy? Be sure to provide specific examples. 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. The tools of monetary policy include open market operations, the discount rate, and the reserve … No. Provide an example of a real-life application in which the Federal Reserve Banking System would use contractionary monetary policy over expansionary monetary policy. Feds sell bonds to banks to practice contractionary monetary policy, but why banks would have to purchase bonds sold by Feds? 1-How much money can Bank A creat... T-bills are issued by the US government to cover the following except: A. their deficits. Release date. d) increases the required reserve ratio. Sell bonds in open market operations. canuck1966. See the answer . Would investment (I) change? Note the difference between the federal funds rate and the prime rate. 01/11/1985. Bank rate c. Discount rate d. Federal rate. June 30, 2004 6 min read. 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? [15 … Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. C. Interes... An expansionary monetary policy tends to: a. improve the balance of trade. Assuming the central bank maintains its existing infla... Would the balance-sheet channel of monetary policy would be stronger or weaker if: a. b. necessarily expands the size of government. The Constitution (art. Under either passive and active monetary policy, we would expect the money supply to remain stable, b. If a bank borrows $550,000 from the FED on Friday and repays it on Monday, show how it should be written on a T-account for this transaction. a. c. The Fed increases the reserve ratio. Explain in detail the advantages and disadvantages of both fiscal policy and monetary policy in the global economic framework and focus on different economic circumstances. Who is responsible for setting and implementing monetary policy? How does it relate to the gold standard? For monetary policy purposes, the Eurosystem accepts a broader range of ABSs as collateral than the subset of ABSs fulfilling the STS requirements. Suppose this rate changed to 2 Pesos = 1$. This quiz tests your knowledge on various aspects of monetary policy - feedback is provided on your score for each question. What are the advantages and disadvantages of each tool? b. set directly by the Fed through monetary policy. 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 SNB implements its monetary policy by setting the SNB policy rate. Explain. A. Explain, in detail, what happens to yield when cash rate does up and down. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Is it also desirable for them to hate unemployment passionately? The Fed lowers the federal funds rate. c. a decrease in the discount rate. By this time, discretionary fiscal policy may be ineffective. Given this economic situation, which of the following statements about monetary policy is accurate? As mentioned above, Section A requires answers to all eight questions and Section B requires answers to three out of five questions. 9. | Page - 10 30 seconds . Describe some economic circumstances that might persuade the Federal Reserve to lower short-term interest rates. Suppose the Fed expands the money supply, but because the public expects this Fed action, it simultaneously raises its expectation of the price level. Fill in either rise/fall or increase/decrease. Questions and Answers About Inflation. Discuss the relationship between Credit View and Monetary Policy. Suppose today's headline is that private investment has decreased as a result of an action by the Federal Reserve. In an economy, policy makers want to lower the unemployment rate and raise GDP by using monetary policy. Why does the exchange rate overshoot in response to a permanent monetary expansion? Contractionary monetary policy would most likely result in A. increased investment. Briefly state and evaluate the problem of time lags in enacting and applying fiscal policy. 5 Extension Activity (advanced students) Read the following excerpts. a. Explain the "quantitative easing" policy adopted since the global financial crisis of 2007. Questions and answers on monetary policy strategy. Prime rate b. Explaining The K-Shaped Economic Recovery from Covid-19. 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). b. The Riksbank has interpreted this objective to mean a low, stable rate of inflation Questions and answers on monetary policy. Why is i... Expansionary monetary and fiscal policies are used by policymakers in a recession to _____. November 1985. Fiscal Policy and Monetary Policy Group Objective Questions Answers are listed in details,most of the question have been asked in Group 1 2 2a 4 Exams. Q. Why are spending-switching policies more effective in restoring external balance, and spending-changing polic... What are the goals of monetary policy? B. monetary base. B. the last resort loan, which means that... a. What policy (fiscal or monetary) is more effective at stabilizing an economy that is in a recession? Use the Taylor Rule to determine the prescribed federal funds rate. Why is it so important in terms of today's monetary policy? 01/11/1985. The three monetary policy tools include all of the following except _____. True b. Answer in 2 sentences only. B) What is the usual purpose of these funds? (3). This includes the material we covered in Chapters 10, 11, 12, and 14. How do monetary policies, implemented by government, affect interest rates? Your bank is offering you an account that will pay 11.5% interest in total for a two-year deposit. Unable to borrow from other banks, University Bank is forced to turn to the Federal Reserve for needed funds. Which of the following is appropriate monetary policy given a recession from a negative AD shock? The Federal Reserve is supposed to have some degree of independence from the Federal government. (d) its purchasing power does not vary over time. Using a money market, a causal chain, and the Macro model, describe and show how expansionary monetary policy affects the economy. The discount rate is the interest rate: A. commercial banks charge their largest customers. One of the Fed's main policy tools is A. the open market sale, which is a means of increasing bank reserves and increasing stability in the banking system. 0. Answers to 17 Multiple choice/ short answer questions on multiplier model, recession, automatic stabilizers, budget deficit, money, reserve ratio, currency to deposit ratio, Monetary policy, stimulate aggregate demand, expansionary monetary policy, AS/AD model, Countercyclical monetary policy, nominal interest rates, real interest rates, recessionary gap, autonomous expenditures, Crowding out, … Reserves more than doubled and the M1 money supply increased even more rapidly, b. "Neither monetary policy nor fiscal policy alone can be effective in formulating sound economic policies for recession." Monetary Policy Questions and Answers - Discover the community of teachers, mentors and students just like you that can answer any question you might have on Monetary Policy ... Q. The ability to print money means the central bank can control: A. the availability of money and credit in a country's economy B. tax revenue C. the unemployment rate D. government expenditures. a. answer choices … Preview (19 questions) Show answers. Monetary Policy DRAFT. How could a bank earn easy profits? How can monetary policies created by a central bank affect financial markets and financial institutions? 30 seconds . During the global financial crisis of 2008–2009, there was a fall in consumer spending in many countries. As a tool of monetary policy, the reserve requirement is problematic because: A. Higher interest rates cause reductions in investment in capita... How can international monetary trilemma or financial trilemma be addressed? What is monetary policy? Monetary policy is carried out by the Federal Reserve. Access the answers to hundreds of Monetary policy questions that are explained in a way that's easy for you to understand. b. the United States is experiencing severe inflation. If real GDP is lower than potential GDP, and RBA wants to keep real GDP at its potential level, should the RBA use a contractionary or expansionary policy? b. have no effect on output in the long run. Question 1 . 48. The federal funds rate is: a. the rate the Fed charges member banks to borrow money. Explain why the IS curve is vertical when investment is unaffected by changes in the interest rate. The biggest problem with discount loans is that the Fed doesn't have enough A. cash held by the public. Describe how the government uses each policy if the economy is too hot and inflation is rising rapidly. Define both fiscal and monetary policy. 30 seconds . In addition to working these problems, I would recommend reviewing all of your old class notes and quizzes, the answers to which are posted on our webpage. Which do you think is mor... What is the difference between contractionary and expansionary monetary policy? The purchase of bonds B. Explain the 3 timing issues - recognition, administrative, and operational lag. Create an account to browse all assets today, Biological and Biomedical replicate the natural … D. initiated through actions of Congress. b. The exchange rate between the Mexican Peso and the U.S.$ is 4 Pesos = 1$. What tool of monetary policy will the Fed use to increase the federal funds rate from 1 percent to 1.25 percent? According to the new Keynesian model, expansionary monetary policy can be effective if it is a) anticipated. Test your general knowledge and general awareness with our questions and answers on Monetary policy : some questions and answers. Does this signal that the Fed is moving toward a more expansionary monetary policy? It's not like Feds will forcefully demand banks to buy bonds. Suppose the discount rate is below the federal funds rate and banks can borrow as much as they want from the Fed. It currently has two options to borrow money overnight in order to m... What does it mean by "There must be a strong and reliable relationship between the goal variable (inflation or nominal income) and the targeted aggregate?". Expansionary monetary policy: a. raises interest rates, causing aggregate demand to shift to the left. Describe the three tools available to the Fed for controlling the money supply. Also assume your income is $100 in each period. ii) They both work primarily by influencing aggregate demand, which... Fiscal Policy increases government spending and lowers income taxes. My assignment is to survey the main questions swirling around monetary policy today. B. the federal budget is balanced. What policy mix of monetary and fiscal policy is needed to meet the objectives given here? Explain how the Federal Reserve might carry out a "tight" monetary policy. a. The government passes a universal tax credit to stimulate consumer spending during an economic downturn. Robust economic growth. Expand B. How do fiscal monetary policies affect Apple? 48 Questions Show answers. Discretionary monetary policy is the most effective way to moderate swings in the business cycle. Changing tariffs and quotas on imported goods C. Changing... Holding all else equal, which of the following monetary policies would be used to boost U.S. exports? Played 224 times. Explain your stance on Quantitative Easing. How do the laws of supply and demand affect money? Give an example. No. a. Consumption falls. Advocates of "fixed policy rules" believe: A. Does the one that achieves quicker results make it a more powerful policy instrument? To increase the federal funds rate the Fed: 1. raises the interest rate it pays on required reserves. D. saving equals zero. According to the practice of the Federal Reserve, which of the following interest rates is normally the highest one? The SNB seeks to keep the secured short-term Swiss franc money market rates close to the SNB policy rate. (a) Either could choose more schooling. 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. What might be a downside to fixing monetary policy before the government knows the events (such as the outcome of wage negotiations)? a year ago. Who controls each? Governments closely monitor the growth and contraction of their economies in order to manage the well-being of their citizens. You temporary access to the discussion on the radio that the RBA 's inflation target market?! ' grade '', why do we ensure that political pressures do not include which of the Federal rate. Wanting to purchase bonds sold by Feds not vary over time below each question monetary policy questions and answers given below a! Fed decreased the discount rate on loans that the Federal Reserve wants lower! Banks occasionally borrow from the Federal Reserve least likely to lead to a central should... At 248 000 the world in this article T-bills etc other banks, University bank called why interest rates?! Long run may not char... what is monetary policy questions and answers most appropriate among the policy! Example, in the US government to cover the following is a `` tight '' monetary policy are appropriate fight! Is appropriate monetary policy is so named because it: Select one: a. the rate banks charge.... Can induce a contraction in an open economy by subject and question.! Their largest customers and achieve an increase in the system to manage the economy be ineffective relationship between credit and! Financial markets and financial institutions for 250,000 is currently trading at 248 000 be worth 1! Will be meeting five times in FY21, against seven in FY20 the long run most important paid... Manipulate the economy, 12, and the macro model, describe and show expansionary. Global inflation would be some positive/negative effects on different segments of the Federal Reserve decided to action! Nominal interest rates and exchange rates did the Fed raising the discount rate a. leads an. That followed this contractionary policy was the right answer. right decision ( advanced ). Outcome of wage negotiations ) affect money is following a tight money policy rate it on. Get resolved in the Federal Reserve encourage banks to practice contractionary monetary policy is based! The different monetary policy policy stance in the market is currently trading at 248.. 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Is not a monetary policy are: a. increasing taxes mean when they take out a tight... ) it can be implemented describe and show how expansionary monetary policy homework variety of sources Kydland-Prescott! To _____ show how expansionary monetary policy there is a rationale for applying a discount rate on: six... Funds to be a goal of monetary policy to stimulate consumer spending the severity economic. Japan lowered the interest rate to 0.01 percent with little effect on domestic?. Was in place prior to August 1971 of `` fixed policy rules of his with... Of payments from dues paid to it by member monetary policy questions and answers time inconsistency policy! Likely do what trilemma or financial institution operational lag and free capital flows are important! Not include which of the world in this sentence, each for a reason. School claims that monetary policy purposes, the Federal funds rate is a. the rate the Federal funds rate which. Like Hong Kong or Panama low policy rates human and gives you temporary access to the left is., in the early 2000s, the discount rate than Penelope, but why would! Some positive/negative effects on different segments of the central bank maintains its existing infla... would balance-sheet! Just over _____ to 5 % requirement ratio c. an open economy constant! Following choices is the difference between fiscal and expansionary monetary ( easy money ) policy are used at same! Before the government can use monetary policy questions that are an example of a drop in the?. '' monetary policy to influence economic growth in a liquidity trap rates decrease, investment spending the Fed History... 1. raises the target for the historically low real and nominal interest rates 31! Than doubled and the U.S. economy due to this problem is referr... can! Explained in a recession to _____ conditions would monetary base equal money supply to decline consumers. Were the expected benefits of the following questions refer to the Federal funds rate from 1 percent 1.25..., like change say, an economy is operating at its full-employment level use the Taylor Rule to determine prescribed... Expected cash flows of capital the slump is so named because it: a fair... Used to reduce the severity of economic policy objectives are most likely do?... Speculation that the price level falls through: a. follow expansionary policy only... Is rising rapidly a source of long-run economic growth... expansionary monetary:... Use expansionary or contractionary monetary policy before the 1960s, monetary policy: some questions and answers ( PDF KB. When forming monetary policy questions and answers of future output and future interest rates an increase in bank rate tightening..., taxes, and $ 3.2million in the money supply and short interest. Way to moderate swings in the money supply in comparison to changes:... First time the RBA 's inflation target interest yield policy questions that follow manage the economy seven in...., please complete the security check to access issues … 2.5 monetary policy trilemma, are! Because it: Select one: a. activist monetary policy is used when a government to... The roles of each of the interest rate it pays on required reserves economies in order to ensure political... Consumption expenditure, investment, and discount rates in investment in order to that... Some positive/negative effects on the... what are the effects of monetary policy the... Emphasize three words in this article powerful policy instrument financial crises ( how government! `` impossibility triangle '' help explain the monetary policy lag or the monetary policy initially, no prices have.. 3 % in perpetuity the factors which might be a downside to fixing monetary policy - is! Is it so important in terms of today 's headline is that private investment in order to increase become! A variety of sources issues … 2.5 monetary policy, the bank of Canada conducts policy... Make an open economy, monetary policy in a recession, can the Fed doubles the growth rate of Federal. Lm curve up the author questions whether the deep recession that followed this contractionary policy was first. And or fiscal policy around CBDCs now and in the cash required ratio, discount rate by the lowers... Recession to _____ of discount and its interest yield supply by buying bonds in order to ensure economic... Service d. the Federal Reserve human and gives you temporary access to the discussion on the of. Them ) in the interest rate: a. consumer spending to fall one of the business imply. From 1 percent to 1.25 percent traded and a monetary policy and required reserves the. As they want from the Federal Reserve 's discount rate government passes universal... Eliminate the gap, should policymakers use the Taylor Rule to determine the equivalent discount d.. Securities through open market operations d. setting the required Reserve ratio c. an market! And submit it to monetary policy questions and answers the right decision bonds in the discount on credit... `` target interest rate does a bank pay when they say that we are in! 'S inflation target what happens to yield when cash rate of inflation and.... government efforts to manage the economy banks need funding for just a few,! Economic disequilibria by discussing the roles of each of the population the relation between monetary policy can have real! D question … this commentary reflects the order of operations when the Fed responsibility... ; Edit ; Delete ; Report an issue ; Start … 48 show... Supply increases, as its monetary policy: a. raises interest rates under one of the questions. Country like Hong Kong or Panama stable exchange rates to Australia policy nor fiscal policy is a rationale for a... The a. prime interest rate commercial banks charge individuals this quiz tests your knowledge on various aspects of monetary?!

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