Question 1

The Commonwealth Government currently issues Treasury notes with varying terms to maturity:

Accepted Answer

A)  twice a year. 
B)  three times a year. 
C)  four times a year. 
D)  to match the government's main revenue receipt dates. 
A)  twice a year. 
B)  three times a year. 
C)  four times a year. 
D)  to match the government's main revenue receipt dates.

Question 2

In relation to impacts on the Australian financial system liquidity,if payments to the official sector exceed official payments to the private sector then there will be:

Accepted Answer

A)  a system down. 
B)  a system surplus. 
C)  a system deficit. 
D)  a system square. 
A)  a system down. 
B)  a system surplus. 
C)  a system deficit. 
D)  a system square.

Question 3

For a debt payment system,the processing of the payment begins at the:

Accepted Answer

A)  payer's financial institution. 
B)  payee's financial institution. 
C)  Australian Reserve Bank. 
D)  exchange settlement account of the payer. 
A)  payer's financial institution. 
B)  payee's financial institution. 
C)  Australian Reserve Bank. 
D)  exchange settlement account of the payer.

Question 4

If a government's income from tax receipts exceeds its expenditure,the government is running a:

Accepted Answer

A)  deficit, and is a net borrower of funds. 
B)  surplus, and is a net borrower of funds. 
C)  deficit, and is a net saver of funds. 
D)  surplus, and is a net saver of funds. 
A)  deficit, and is a net borrower of funds. 
B)  surplus, and is a net borrower of funds. 
C)  deficit, and is a net saver of funds. 
D)  surplus, and is a net saver of funds.

Question 5

The special account that providers of payment services have at the Reserve Bank is called a/an:

Accepted Answer

A)  balance of payments account. 
B)  exchange settlement account. 
C)  payment services account. 
D)  Reserve Bank payment account. 
A)  balance of payments account. 
B)  exchange settlement account. 
C)  payment services account. 
D)  Reserve Bank payment account.

Question 6

The transmission channel related to changing the money supply,followed by changes in short-term rates and pressure on interest rates to change the cost of funds,and consequently to influence economic activity,is known as a:

Accepted Answer

A)  credit channel. 
B)  monetary policy channel. 
C)  foreign exchange channel. 
D)  wealth channel. 
A)  credit channel. 
B)  monetary policy channel. 
C)  foreign exchange channel. 
D)  wealth channel.

Question 7

When a government's budget is in _____,it is required to issue new government securities,and when the budget is in _______,it may retire maturing debt and redeem some debt prior to maturity.

Accepted Answer

A)  surplus; surplus 
B)  deficit; surplus 
C)  deficit; deficit 
D)  surplus; deficit 
A)  surplus; surplus 
B)  deficit; surplus 
C)  deficit; deficit 
D)  surplus; deficit

Question 8

Open market operations by the Australian Reserve Bank refer to:

Accepted Answer

A)  the method by which the Australian Reserve Bank allows banks to raise short-term funds up to a year. 
B)  the method by which the Australian Reserve Bank implements monetary policy. 
C)  the market for short-term securities. 
D)  the method by which the Australian Reserve Bank monitors the financial sector. 
A)  the method by which the Australian Reserve Bank allows banks to raise short-term funds up to a year. 
B)  the method by which the Australian Reserve Bank implements monetary policy. 
C)  the market for short-term securities. 
D)  the method by which the Australian Reserve Bank monitors the financial sector.

Question 9

Which of the following financial institutions currently has the largest holdings of Commonwealth Government securities?

Accepted Answer

A)  A state government public authority 
B)  The Reserve Bank of Australia 
C)  General insurance offices 
D)  Life assurance offices 
A)  A state government public authority 
B)  The Reserve Bank of Australia 
C)  General insurance offices 
D)  Life assurance offices

Question 10

Discuss what factors influence financial system liquidity in Australia.

Accepted Answer

Three major factors affect financial sys

Question 11

Which of the following statements in relation to the Australian Commonwealth government's borrowing programs is incorrect?

Accepted Answer

A)  The early 1990s saw an increase in debt issues to fund the budget deficits at that time. 
B)  The government tends to fund short-term liquidity requirements with the issue of Treasury notes. 
C)  When government income exceeds forecast expenditures, the resulting deficit tends to be funded by short-term debt. 
D)  Fiscal constraint by successive Australian governments for the second part of the 1990s brought the government budgets back into surplus until recently. 
A)  The early 1990s saw an increase in debt issues to fund the budget deficits at that time. 
B)  The government tends to fund short-term liquidity requirements with the issue of Treasury notes. 
C)  When government income exceeds forecast expenditures, the resulting deficit tends to be funded by short-term debt. 
D)  Fiscal constraint by successive Australian governments for the second part of the 1990s brought the government budgets back into surplus until recently.

Question 12

The Reserve Bank focuses much of its attention on the level of underlying inflation in the Australian economy.What are the important implications of a low level of underlying inflation for the markets?

Accepted Answer

A)  A low level of underlying inflation restricts the potential for future economic growth and business investment. 
B)  The Reserve Bank needs to maintain tight monetary policy to ensure inflation remains low. 
C)  A low level of underlying inflation leads to increased business confidence and capital investment. 
D)  A low level of underlying inflation adds to expectations of significant future interest rate increases. 
A)  A low level of underlying inflation restricts the potential for future economic growth and business investment. 
B)  The Reserve Bank needs to maintain tight monetary policy to ensure inflation remains low. 
C)  A low level of underlying inflation leads to increased business confidence and capital investment. 
D)  A low level of underlying inflation adds to expectations of significant future interest rate increases.

Question 13

With a/an ______ stock issue,ownership is registered electronically and a receipt is issued.

Accepted Answer

A)  bearer 
B)  submitted 
C)  inscribed 
D)  tendered 
A)  bearer 
B)  submitted 
C)  inscribed 
D)  tendered

Question 14

For bond issues through the AOFM,bids are made in terms of price up to three decimal places.

Accepted Answer

A) True 
 B)False

Question 15

There is often a crowding-out effect when a government deficit is high and the government issues large amounts of long-term bonds.

Accepted Answer

A) True 
 B)False

Question 16

Other things being equal,an increase in the government budget deficit:

Accepted Answer

A)  can increase business prospects. 
B)  can force interest rates down. 
C)  can force interest rates up. 
D)  may not have any effect on interest rates. 
A)  can increase business prospects. 
B)  can force interest rates down. 
C)  can force interest rates up. 
D)  may not have any effect on interest rates.

Question 17

Price stability is desirable because:

Accepted Answer

A)  everyone is better off when prices are stable. 
B)  inflation creates uncertainty about future planning. 
C)  it guarantees full unemployment. 
D)  it increases the efficiency of the Australian Reserve Bank. 
A)  everyone is better off when prices are stable. 
B)  inflation creates uncertainty about future planning. 
C)  it guarantees full unemployment. 
D)  it increases the efficiency of the Australian Reserve Bank.

Question 18

The advantages associated with the issue of inscribed stock for bond issues are:

Accepted Answer

A)  it is less costly to maintain a register of bond holders than print and distribute physical bonds. 
B)  inscribed stock protects holders from risk of theft. 
C)  coupon payments are easily made electronically to the registered holders. 
D)  all of the given answers. 
A)  it is less costly to maintain a register of bond holders than print and distribute physical bonds. 
B)  inscribed stock protects holders from risk of theft. 
C)  coupon payments are easily made electronically to the registered holders. 
D)  all of the given answers.

Question 19

The transmission channel that affects the value of assets and liabilities within the domestic economy,and thus influences economic activity,is known as a:

Accepted Answer

A)  credit channel. 
B)  monetary policy channel. 
C)  foreign exchange channel. 
D)  wealth channel. 
A)  credit channel. 
B)  monetary policy channel. 
C)  foreign exchange channel. 
D)  wealth channel.

Question 20

A Treasury bond holder who wishes to redeem a bond early may sell it:

Accepted Answer

A)  back to Treasury. 
B)  back to the central bank. 
C)  in the secondary market. 
D)  back to the broker. 
A)  back to Treasury. 
B)  back to the central bank. 
C)  in the secondary market. 
D)  back to the broker.

Exam 12: Government Debt, monetary Policy and the Payments System

The Commonwealth Government currently issues Treasury notes with varying terms to maturity:

In relation to impacts on the Australian financial system liquidity,if payments to the official sector exceed official payments to the private sector then there will be:

For a debt payment system,the processing of the payment begins at the:

If a government's income from tax receipts exceeds its expenditure,the government is running a:

The special account that providers of payment services have at the Reserve Bank is called a/an:

The transmission channel related to changing the money supply,followed by changes in short-term rates and pressure on interest rates to change the cost of funds,and consequently to influence economic activity,is known as a:

When a government's budget is in _____,it is required to issue new government securities,and when the budget is in _______,it may retire maturing debt and redeem some debt prior to maturity.

Open market operations by the Australian Reserve Bank refer to:

Which of the following financial institutions currently has the largest holdings of Commonwealth Government securities?

Discuss what factors influence financial system liquidity in Australia.

Which of the following statements in relation to the Australian Commonwealth government's borrowing programs is incorrect?

The Reserve Bank focuses much of its attention on the level of underlying inflation in the Australian economy.What are the important implications of a low level of underlying inflation for the markets?

With a/an ______ stock issue,ownership is registered electronically and a receipt is issued.

For bond issues through the AOFM,bids are made in terms of price up to three decimal places.

There is often a crowding-out effect when a government deficit is high and the government issues large amounts of long-term bonds.

Other things being equal,an increase in the government budget deficit:

Price stability is desirable because:

The advantages associated with the issue of inscribed stock for bond issues are:

The transmission channel that affects the value of assets and liabilities within the domestic economy,and thus influences economic activity,is known as a:

A Treasury bond holder who wishes to redeem a bond early may sell it:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

When a government's budget is in _,it is required to issue new government securities,and when the budget is in ___,it may retire maturing debt and redeem some debt prior to maturity.