Question 1

One goal of monetary policy (according to the Reserve Bank Act (1959))is:

Accepted Answer

A) maintaining a strong exchange rate for the dollar relative to other currencies. 
B) a high rate of unemployment. 
C) price stability. 
D) a high rate of employment. 
A) maintaining a strong exchange rate for the dollar relative to other currencies. 
B) a high rate of unemployment. 
C) price stability. 
D) a high rate of employment.

Question 2

Explain the consequences of expansionary monetary policy if the economy was close to, or at, potential GDP level.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Expansionary monetary policy involves th

Question 3

Suppose the following table illustrates the values of real and potential GDP and the price level, if the Reserve Bank of Australia (RBA)does not change their current policy to be more contractionary or expansionary. Suppose that the RBA uses an appropriate policy and is successful in keeping real GDP at its potential level in 2018.
   
State whether each of the following will be higher or lower than if the RBA had taken no action:
a.Real GDP.
b.Potential GDP.
c.The price level.
d.The unemployment rate.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.If the RBA's policy was successful, re

Question 4

Refer to Figure 12.3 for the following question.
Figure 12.3
  
-Refer to Figure 12.3. In this figure, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Accepted Answer

A) decrease income taxes 
B) increase government spending 
C) buy financial securities 
D) sell financial securities 
A) decrease income taxes 
B) increase government spending 
C) buy financial securities 
D) sell financial securities

Question 5

What economic objectives are the Reserve Bank of Australia required to pursue in its conduct of monetary policy and what relative importance is placed on these objectives?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Under the Reserve Bank Act (1959), the o

Question 6

When the Reserve Bank of Australia raises the cash rate, this normally leads to:

Accepted Answer

A) other interest rates rising, which stimulates consumption spending. 
B) people spending less because they have less money. 
C) other interest rates falling, which stimulates investment spending. 
D) other interest rates rising, which reduces investment spending. 
A) other interest rates rising, which stimulates consumption spending. 
B) people spending less because they have less money. 
C) other interest rates falling, which stimulates investment spending. 
D) other interest rates rising, which reduces investment spending.

Question 7

Explain how monetary policy affects aggregate demand, the price level and real GDP.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Changes in monetary policy, which leads

Question 8

An increase in real GDP will __________ the demand for money and ____________the equilibrium interest rate.

Accepted Answer

A) decrease; decrease 
B) decrease; increase 
C) increase; decrease 
D) increase; increase 
A) decrease; decrease 
B) decrease; increase 
C) increase; decrease 
D) increase; increase

Question 9

If the interest rate increases, then:

Accepted Answer

A) there will be an upward movement along the money demand curve. 
B) there will be a downward movement along the money demand curve. 
C) the money demand curve will shift to the right. 
D) the money demand curve will shift to the left. 
A) there will be an upward movement along the money demand curve. 
B) there will be a downward movement along the money demand curve. 
C) the money demand curve will shift to the right. 
D) the money demand curve will shift to the left.

Question 10

The Reserve Bank of Australia can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

Accepted Answer

A) True 
 B)False

Question 11

How does 'monetary policy' affect the share market?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Monetary policy affects the cash rate, w

Question 12

Rising real GDP will increase the demand for money and short-term interest rates.

Accepted Answer

A) True 
 B)False

Question 13

Inflation targeting is when the Reserve Bank of Australia uses monetary policy with the aim of keeping the inflation rate at an annual average of between 2% and 3% in the medium term.

Accepted Answer

A) True 
 B)False

Question 14

Explain the effect that a rise in interest rates has on real GDP in the short term.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

In the short term, the rise in interest

Question 15

Give an example of a monetary policy target. Explain which monetary policy target the Reserve Bank of Australia (RBA)uses and why the RBA uses a policy target.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

One possible target is the interest rate

Question 16

A decrease in real GDP can:

Accepted Answer

A) increase money demand and decrease the interest rate. 
B) increase money demand and increase the interest rate. 
C) decrease money demand and decrease the interest rate. 
D) decrease money demand and increase the interest rate. 
A) increase money demand and decrease the interest rate. 
B) increase money demand and increase the interest rate. 
C) decrease money demand and decrease the interest rate. 
D) decrease money demand and increase the interest rate.

Question 17

'Quantitative easing' refers to the action of the central bank:

Accepted Answer

A) to commence open market operations by buying short-term Treasury securities. 
B) to add to the effect of a contractionary monetary policy using an increase in the money supply. 
C) to offset the effect of a very high cash rate. 
D) to buy long-term Treasury notes, when the cash rate can no longer be lowered. 
A) to commence open market operations by buying short-term Treasury securities. 
B) to add to the effect of a contractionary monetary policy using an increase in the money supply. 
C) to offset the effect of a very high cash rate. 
D) to buy long-term Treasury notes, when the cash rate can no longer be lowered.

Question 18

For over a decade, monetary policy in Australia has been carried out mainly by using repurchase agreements rather than the outright purchase of government securities.

Accepted Answer

A) True 
 B)False

Question 19

What are the main reasons for keeping a central bank independent from the government?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

One main reason to keep the central bank

Question 20

If the overnight cash rate falls, then ceteris paribus:

Accepted Answer

A) interest rates will fall and share prices will rise. 
B) interest rates will rise and share prices will rise. 
C) interest rates will fall and share prices fall. 
D) interest rates will rise and share prices will fall. 
A) interest rates will fall and share prices will rise. 
B) interest rates will rise and share prices will rise. 
C) interest rates will fall and share prices fall. 
D) interest rates will rise and share prices will fall.

One goal of monetary policy (according to the Reserve Bank Act (1959))is:

Explain the consequences of expansionary monetary policy if the economy was close to, or at, potential GDP level. _ _

Refer to Figure 12.3 for the following question. Figure 12.3 -Refer to Figure 12.3. In this figure, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

What economic objectives are the Reserve Bank of Australia required to pursue in its conduct of monetary policy and what relative importance is placed on these objectives? _ _

When the Reserve Bank of Australia raises the cash rate, this normally leads to:

Explain how monetary policy affects aggregate demand, the price level and real GDP. _ _

An increase in real GDP will the demand for money and __the equilibrium interest rate.

If the interest rate increases, then:

The Reserve Bank of Australia can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

How does 'monetary policy' affect the share market? _ _

Rising real GDP will increase the demand for money and short-term interest rates.

Inflation targeting is when the Reserve Bank of Australia uses monetary policy with the aim of keeping the inflation rate at an annual average of between 2% and 3% in the medium term.

Explain the effect that a rise in interest rates has on real GDP in the short term. _ _

Give an example of a monetary policy target. Explain which monetary policy target the Reserve Bank of Australia (RBA)uses and why the RBA uses a policy target. _ _

A decrease in real GDP can:

'Quantitative easing' refers to the action of the central bank:

For over a decade, monetary policy in Australia has been carried out mainly by using repurchase agreements rather than the outright purchase of government securities.

What are the main reasons for keeping a central bank independent from the government? _ _

If the overnight cash rate falls, then ceteris paribus:

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 12: Monetary Policy

One goal of monetary policy (according to the Reserve Bank Act (1959))is:

Refer to Figure 12.3 for the following question. Figure 12.3 -Refer to Figure 12.3. In this figure, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

When the Reserve Bank of Australia raises the cash rate, this normally leads to:

Explain how monetary policy affects aggregate demand, the price level and real GDP. _____________________________________________________________________________________________ _____________________________________________________________________________________________

An increase in real GDP will __________ the demand for money and ____________the equilibrium interest rate.

If the interest rate increases, then:

The Reserve Bank of Australia can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

How does 'monetary policy' affect the share market? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Rising real GDP will increase the demand for money and short-term interest rates.

Inflation targeting is when the Reserve Bank of Australia uses monetary policy with the aim of keeping the inflation rate at an annual average of between 2% and 3% in the medium term.

Explain the effect that a rise in interest rates has on real GDP in the short term. _____________________________________________________________________________________________ _____________________________________________________________________________________________

A decrease in real GDP can:

'Quantitative easing' refers to the action of the central bank:

For over a decade, monetary policy in Australia has been carried out mainly by using repurchase agreements rather than the outright purchase of government securities.

What are the main reasons for keeping a central bank independent from the government? _____________________________________________________________________________________________ _____________________________________________________________________________________________

If the overnight cash rate falls, then ceteris paribus:

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Explain how monetary policy affects aggregate demand, the price level and real GDP. _ _

An increase in real GDP will the demand for money and __the equilibrium interest rate.

How does 'monetary policy' affect the share market? _ _

Explain the effect that a rise in interest rates has on real GDP in the short term. _ _

What are the main reasons for keeping a central bank independent from the government? _ _