Question 1

If the Reserve Bank of Australia pursues expansionary monetary policy, ceteris paribus, aggregate demand will:

Accepted Answer

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

Question 2

If the central bank uses interest rate targeting, the money supply is:

Accepted Answer

A) perfectly inelastic at the current interest rate. 
B) targeted by the use of open market operations. 
C) fixed by the Reserve Bank of Australia. 
D) perfectly elastic at the current interest rate. 
A) perfectly inelastic at the current interest rate. 
B) targeted by the use of open market operations. 
C) fixed by the Reserve Bank of Australia. 
D) perfectly elastic at the current interest rate.

Question 3

The 'cash rate' is the interest rate:

Accepted Answer

A) the Reserve Bank of Australia charges commercial banks. 
B) banks charge their largest customers. 
C) banks charge each other for overnight loans. 
D) on a government bond or security. 
A) the Reserve Bank of Australia charges commercial banks. 
B) banks charge their largest customers. 
C) banks charge each other for overnight loans. 
D) on a government bond or security.

Question 4

An expansionary monetary policy would be more effective if it caused:

Accepted Answer

A) interest rates to increase, leading to an exchange rate appreciation and a fall in net exports. 
B) interest rates to decrease, leading to an exchange rate appreciation and a fall in net exports. 
C) interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports. 
D) interest rates to increase, leading to an exchange rate depreciation and a rise in net exports. 
A) interest rates to increase, leading to an exchange rate appreciation and a fall in net exports. 
B) interest rates to decrease, leading to an exchange rate appreciation and a fall in net exports. 
C) interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports. 
D) interest rates to increase, leading to an exchange rate depreciation and a rise in net exports.

Question 5

The Reserve Bank of Australia is able to use monetary policy to keep real GDP exactly at its potential level.

Accepted Answer

A) True 
 B)False

Question 6

Use the dynamic aggregate demand and aggregate supply model to explain what monetary policy stance the Reserve Bank of Australia should take if the economy is entering a period of high inflation.
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_____________________________________________________________________________________________

Accepted Answer

If economic indicators are showing that

Question 7

The Reserve Bank of Australia targets a per annum inflation rate, on average over the business cycle, of between:

Accepted Answer

A) 1% and 2%. 
B) 2% and 4%. 
C) 3% and 4%. 
D) 2% and 3%. 
A) 1% and 2%. 
B) 2% and 4%. 
C) 3% and 4%. 
D) 2% and 3%.

Question 8

The Reserve Bank of Australia uses open market operations:

Accepted Answer

A) usually every day. 
B) once a month when the Reserve Bank Board meets to discuss monetary policy. 
C) only when it wants to increase or decrease the cash rate. 
D) only when it is conducting monetary policy. 
A) usually every day. 
B) once a month when the Reserve Bank Board meets to discuss monetary policy. 
C) only when it wants to increase or decrease the cash rate. 
D) only when it is conducting monetary policy.

Question 9

The policy aimed at managing interest rates to pursue macroeconomic objectives is called:

Accepted Answer

A) fiscal policy. 
B) interest rate policy. 
C) monetary policy. 
D) exchange rate policy. 
A) fiscal policy. 
B) interest rate policy. 
C) monetary policy. 
D) exchange rate policy.

Question 10

What effect will a rise in interest rates have on the exchange rate and net exports?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A rise in interest rates (assuming that

Question 11

In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy?

Accepted Answer

A) The RBA believes that aggregate demand was growing too slowly to keep up with potential GDP. 
B) The RBA fears that unemployment is climbing above the natural rate of unemployment. 
C) The RBA is concerned that aggregate demand would continue to exceed the growth in potential GDP. 
D) The RBA is worried that deflation will become a problem. 
A) The RBA believes that aggregate demand was growing too slowly to keep up with potential GDP. 
B) The RBA fears that unemployment is climbing above the natural rate of unemployment. 
C) The RBA is concerned that aggregate demand would continue to exceed the growth in potential GDP. 
D) The RBA is worried that deflation will become a problem.

Question 12

Which of the following is not true about monetary policy?

Accepted Answer

A) Contractionary monetary policy is often more effective at reducing the rate of economic growth than expansionary monetary policy is at increasing the rate of economic growth. 
B) The burden of contractionary monetary policy is not spread evenly among the population. 
C) Contractionary monetary policy can reduce export earnings. 
D) The full effect of monetary policy impacts the economy immediately, as unlike fiscal policy, monetary policy is not subject to time lags. 
A) Contractionary monetary policy is often more effective at reducing the rate of economic growth than expansionary monetary policy is at increasing the rate of economic growth. 
B) The burden of contractionary monetary policy is not spread evenly among the population. 
C) Contractionary monetary policy can reduce export earnings. 
D) The full effect of monetary policy impacts the economy immediately, as unlike fiscal policy, monetary policy is not subject to time lags.

Question 13

The Reserve Bank of Australia currently conducts monetary policy by controlling the money supply.

Accepted Answer

A) True 
 B)False

Question 14

Because money serves as a medium of exchange, an increase in real GDP:

Accepted Answer

A) increases the buying and selling of goods and services and so increases the demand for money. 
B) increases the buying and selling of goods and services and so decreases the demand for money. 
C) decreases the buying and selling of goods and services and so increases the demand for money. 
D) decreases the buying and selling of goods and services and so decreases the demand for money. 
A) increases the buying and selling of goods and services and so increases the demand for money. 
B) increases the buying and selling of goods and services and so decreases the demand for money. 
C) decreases the buying and selling of goods and services and so increases the demand for money. 
D) decreases the buying and selling of goods and services and so decreases the demand for money.

Question 15

Buying a house during a recession may be a good idea if your job seems secure because the Reserve Bank of Australia often lowers interest rates during a recession.

Accepted Answer

A) True 
 B)False

Question 16

Explain how the Reserve Bank of Australia maintains its targeted cash rate on a daily basis.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Each day, the financial system is likely

If the Reserve Bank of Australia pursues expansionary monetary policy, ceteris paribus, aggregate demand will:

If the central bank uses interest rate targeting, the money supply is:

The 'cash rate' is the interest rate:

An expansionary monetary policy would be more effective if it caused:

The Reserve Bank of Australia is able to use monetary policy to keep real GDP exactly at its potential level.

Use the dynamic aggregate demand and aggregate supply model to explain what monetary policy stance the Reserve Bank of Australia should take if the economy is entering a period of high inflation. _ _

The Reserve Bank of Australia targets a per annum inflation rate, on average over the business cycle, of between:

The Reserve Bank of Australia uses open market operations:

The policy aimed at managing interest rates to pursue macroeconomic objectives is called:

What effect will a rise in interest rates have on the exchange rate and net exports? _ _

In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy?

Which of the following is not true about monetary policy?

The Reserve Bank of Australia currently conducts monetary policy by controlling the money supply.

Because money serves as a medium of exchange, an increase in real GDP:

Buying a house during a recession may be a good idea if your job seems secure because the Reserve Bank of Australia often lowers interest rates during a recession.

Explain how the Reserve Bank of Australia maintains its targeted cash rate on a daily basis. _ _

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

If the Reserve Bank of Australia pursues expansionary monetary policy, ceteris paribus, aggregate demand will:

If the central bank uses interest rate targeting, the money supply is:

The 'cash rate' is the interest rate:

An expansionary monetary policy would be more effective if it caused:

The Reserve Bank of Australia is able to use monetary policy to keep real GDP exactly at its potential level.

The Reserve Bank of Australia targets a per annum inflation rate, on average over the business cycle, of between:

The Reserve Bank of Australia uses open market operations:

The policy aimed at managing interest rates to pursue macroeconomic objectives is called:

What effect will a rise in interest rates have on the exchange rate and net exports? _____________________________________________________________________________________________ _____________________________________________________________________________________________

In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy?

Which of the following is not true about monetary policy?

The Reserve Bank of Australia currently conducts monetary policy by controlling the money supply.

Because money serves as a medium of exchange, an increase in real GDP:

Buying a house during a recession may be a good idea if your job seems secure because the Reserve Bank of Australia often lowers interest rates during a recession.

Explain how the Reserve Bank of Australia maintains its targeted cash rate on a daily basis. _____________________________________________________________________________________________ _____________________________________________________________________________________________

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 effect will a rise in interest rates have on the exchange rate and net exports? _ _

Explain how the Reserve Bank of Australia maintains its targeted cash rate on a daily basis. _ _