Question 1

The Board of the Reserve Bank of Australia has stated that they focus on which of the following as their main goal of monetary policy?

Accepted Answer

A) stability of financial markets 
B) low inflation 
C) economic growth 
D) high labour force participation rate 
A) stability of financial markets 
B) low inflation 
C) economic growth 
D) high labour force participation rate

Question 2

If the Reserve Bank of Australia's policy is described as 'contractionary', then it would:

Accepted Answer

A) use open market operations to buy financial securities. 
B) use open market operations to sell financial securities. 
C) reduce the overnight cash rate. 
D) increase the level of liquidity in the financial market. 
A) use open market operations to buy financial securities. 
B) use open market operations to sell financial securities. 
C) reduce the overnight cash rate. 
D) increase the level of liquidity in the financial market.

Question 3

If the Reserve Bank of Australia lowers its target for the cash rate, this indicates that it is:

Accepted Answer

A) pursuing an expansionary monetary policy. 
B) pursuing a contractionary monetary policy. 
C) attempting to combat inflation. 
D) concerned that the growth in aggregate demand will exceed potential GDP. 
A) pursuing an expansionary monetary policy. 
B) pursuing a contractionary monetary policy. 
C) attempting to combat inflation. 
D) concerned that the growth in aggregate demand will exceed potential GDP.

Question 4

Assuming that all else remains constant, contractionary monetary policy causes aggregate demand to:

Accepted Answer

A) rise by less than it otherwise would have and the price level to rise by less than it otherwise would have. 
B) fall by less than it otherwise would have and the price level to rise by less than it otherwise would have. 
C) rise by more than it otherwise would have and the price level to rise by less than it otherwise would have. 
D) fall by more than it otherwise would have and the price level to rise by more than it otherwise would have. 
A) rise by less than it otherwise would have and the price level to rise by less than it otherwise would have. 
B) fall by less than it otherwise would have and the price level to rise by less than it otherwise would have. 
C) rise by more than it otherwise would have and the price level to rise by less than it otherwise would have. 
D) fall by more than it otherwise would have and the price level to rise by more than it otherwise would have.

Question 5

Which of the following correctly describes what the Reserve Bank of Australia (RBA)used as monetary targets in the past?

Accepted Answer

A) The RBA used M3 as its main target after 1993. 
B) The RBA focused on base money as a target after the deregulation of the financial system. 
C) The RBA increased its reliance on interest rate targets since the early 1990s. 
D) After 1996, the RBA focused on monetary targeting. 
A) The RBA used M3 as its main target after 1993. 
B) The RBA focused on base money as a target after the deregulation of the financial system. 
C) The RBA increased its reliance on interest rate targets since the early 1990s. 
D) After 1996, the RBA focused on monetary targeting.

Question 6

If real GDP decreases:

Accepted Answer

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

Question 7

What is 'inflation targeting'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Inflation targeting is a commitment by t

Question 8

Which of the following are goals of monetary policy?

Accepted Answer

A) maximising the value of the dollar relative to other currencies, economic growth and high employment 
B) price stability, maximising the value of the dollar relative to other currencies and high employment 
C) price stability, economic growth and high employment 
D) price stability, economic growth and maximising the value of the dollar relative to other currencies 
A) maximising the value of the dollar relative to other currencies, economic growth and high employment 
B) price stability, maximising the value of the dollar relative to other currencies and high employment 
C) price stability, economic growth and high employment 
D) price stability, economic growth and maximising the value of the dollar relative to other currencies

Question 9

Which of the following situations is one in which the Reserve Bank of Australia will potentially pursue expansionary monetary policy?

Accepted Answer

A) Potential GDP is forecast to be higher than equilibrium GDP. 
B) Potential GDP is forecast to be lower than equilibrium GDP. 
C) Aggregate demand is growing too fast to keep the economy at full employment. 
D) Aggregate demand is growing too slowly and the economy is in danger of producing GDP above full employment. 
A) Potential GDP is forecast to be higher than equilibrium GDP. 
B) Potential GDP is forecast to be lower than equilibrium GDP. 
C) Aggregate demand is growing too fast to keep the economy at full employment. 
D) Aggregate demand is growing too slowly and the economy is in danger of producing GDP above full employment.

Question 10

Which of the following describes what the Reserve Bank of Australia would do to pursue an expansionary monetary policy?

Accepted Answer

A) Use open market operations to buy bonds and securities. 
B) Use open market operations to sell bonds and securities. 
C) Use open market operations to increase the overnight cash rate. 
D) Increase interest rates on mortgages and corporate loans. 
A) Use open market operations to buy bonds and securities. 
B) Use open market operations to sell bonds and securities. 
C) Use open market operations to increase the overnight cash rate. 
D) Increase interest rates on mortgages and corporate loans.

Question 11

An increase in the supply of cash on the overnight money market will lead to a(n)____________ in interest rates and a(n)_________ in investment expenditure.

Accepted Answer

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

Question 12

An argument in favour of the Reserve Bank of Australia (RBA)adopting inflation targeting is that in the long run, the RBA can have an impact on inflation but not on real GDP.

Accepted Answer

A) True 
 B)False

Question 13

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 monetary policy to be more contractionary or expansionary.
   
Suppose that the RBA uses an appropriate policy and is successful in keeping real GDP at potential in 2017. Discuss the type of monetary policy that the RBA should adopt, explaining the effect of the policy on real GDP, the price level and employment. Use a dynamic aggregate demand and supply model to illustrate your answer.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The economy starts in equilibrium in 201

Question 14

If interest rates rise:

Accepted Answer

A) an investment in shares becomes relatively more attractive. 
B) an investment in shares becomes relatively less attractive. 
C) this does not change the attractiveness of investments in the share market. 
D) investors will respond by cutting back on investments in interest-earning assets such as government bonds. 
A) an investment in shares becomes relatively more attractive. 
B) an investment in shares becomes relatively less attractive. 
C) this does not change the attractiveness of investments in the share market. 
D) investors will respond by cutting back on investments in interest-earning assets such as government bonds.

Question 15

Refer to Figure 12.2 for the following question.
Figure 12.2
  
-Refer to Figure 12.2. In this figure, a movement from point A to point B would be caused by:

Accepted Answer

A) a decrease in real GDP. 
B) an increase in the price level. 
C) a decrease in the price level. 
D) an increase in the interest rate. 
A) a decrease in real GDP. 
B) an increase in the price level. 
C) a decrease in the price level. 
D) an increase in the interest rate.

Question 16

Refer to Table 12.1 for the following question.
Table 12.1
  
-Refer to Table 12.1. Consider the hypothetical information in the table for potential GDP, real GDP and the price level in 2016 and in 2017 if the Reserve Bank of Australia does not use monetary policy. If the Reserve Bank of Australia wants to keep real GDP at its potential level in 2017, it should:

Accepted Answer

A) buy government securities. 
B) sell government securities. 
C) increase interest rates. 
D) increase income taxes. 
A) buy government securities. 
B) sell government securities. 
C) increase interest rates. 
D) increase income taxes.

Question 17

If the price level increases:

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 18

Money demand will increase if the price level ________ or if real GDP ________.

Accepted Answer

A) increases; decreases 
B) decreases; decreases 
C) increases; increases 
D) decreases; increases 
A) increases; decreases 
B) decreases; decreases 
C) increases; increases 
D) decreases; increases

Question 19

A government could use control of a central bank to further its political interests by:

Accepted Answer

A) decreasing the cash rate before an election to decrease production and employment. 
B) decreasing the cash rate before an election to increase production and employment. 
C) decreasing the cash rate before an election to decrease inflation. 
D) increasing the cash rate before an election to increase inflation. 
A) decreasing the cash rate before an election to decrease production and employment. 
B) decreasing the cash rate before an election to increase production and employment. 
C) decreasing the cash rate before an election to decrease inflation. 
D) increasing the cash rate before an election to increase inflation.

Question 20

Accounts held with the Reserve Bank of Australia (RBA)which are used by financial institutions to settle payments between each other and with the RBA are called:

Accepted Answer

A) credit accounts. 
B) real-time gross settlement accounts. 
C) debit accounts. 
D) exchange settlement accounts. 
A) credit accounts. 
B) real-time gross settlement accounts. 
C) debit accounts. 
D) exchange settlement accounts.

The Board of the Reserve Bank of Australia has stated that they focus on which of the following as their main goal of monetary policy?

If the Reserve Bank of Australia's policy is described as 'contractionary', then it would:

If the Reserve Bank of Australia lowers its target for the cash rate, this indicates that it is:

Assuming that all else remains constant, contractionary monetary policy causes aggregate demand to:

Which of the following correctly describes what the Reserve Bank of Australia (RBA)used as monetary targets in the past?

If real GDP decreases:

What is 'inflation targeting'? _ _

Which of the following are goals of monetary policy?

Which of the following situations is one in which the Reserve Bank of Australia will potentially pursue expansionary monetary policy?

Which of the following describes what the Reserve Bank of Australia would do to pursue an expansionary monetary policy?

An increase in the supply of cash on the overnight money market will lead to a(n)____ in interest rates and a(n)_ in investment expenditure.

An argument in favour of the Reserve Bank of Australia (RBA)adopting inflation targeting is that in the long run, the RBA can have an impact on inflation but not on real GDP.

If interest rates rise:

Refer to Figure 12.2 for the following question. Figure 12.2 -Refer to Figure 12.2. In this figure, a movement from point A to point B would be caused by:

If the price level increases:

Money demand will increase if the price level or if real GDP .

A government could use control of a central bank to further its political interests by:

Accounts held with the Reserve Bank of Australia (RBA)which are used by financial institutions to settle payments between each other and with the RBA are called:

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

The Board of the Reserve Bank of Australia has stated that they focus on which of the following as their main goal of monetary policy?

If the Reserve Bank of Australia's policy is described as 'contractionary', then it would:

If the Reserve Bank of Australia lowers its target for the cash rate, this indicates that it is:

Assuming that all else remains constant, contractionary monetary policy causes aggregate demand to:

Which of the following correctly describes what the Reserve Bank of Australia (RBA)used as monetary targets in the past?

If real GDP decreases:

What is 'inflation targeting'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Which of the following are goals of monetary policy?

Which of the following situations is one in which the Reserve Bank of Australia will potentially pursue expansionary monetary policy?

Which of the following describes what the Reserve Bank of Australia would do to pursue an expansionary monetary policy?

An increase in the supply of cash on the overnight money market will lead to a(n)____________ in interest rates and a(n)_________ in investment expenditure.

An argument in favour of the Reserve Bank of Australia (RBA)adopting inflation targeting is that in the long run, the RBA can have an impact on inflation but not on real GDP.

If interest rates rise:

Refer to Figure 12.2 for the following question. Figure 12.2 -Refer to Figure 12.2. In this figure, a movement from point A to point B would be caused by:

If the price level increases:

Money demand will increase if the price level ________ or if real GDP ________.

A government could use control of a central bank to further its political interests by:

Accounts held with the Reserve Bank of Australia (RBA)which are used by financial institutions to settle payments between each other and with the RBA are called:

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

What is 'inflation targeting'? _ _

An increase in the supply of cash on the overnight money market will lead to a(n)____ in interest rates and a(n)_ in investment expenditure.

Money demand will increase if the price level or if real GDP .