Question 1

The Reserve Bank of Australia engages in open market operations only when it wants to change interest rates.

Accepted Answer

A) True 
 B)False  False

Question 2

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 B

Question 3

A rise in interest rates will lead to a negative income effect for households that are net borrowers.

Accepted Answer

A) True 
 B)False  True

Question 4

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 5

If interest rates rise,this will _________ the cost of buying new homes,so ________ new homes will be purchased thereby reducing ___________ expenditures.

Accepted Answer

A)  lower; more; consumption 
B)  raise; fewer; consumption 
C)  raise; fewer; investment 
D)  lower; more; investment 
A)  lower; more; consumption 
B)  raise; fewer; consumption 
C)  raise; fewer; investment 
D)  lower; more; investment

Question 6

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 7

Lowering the interest rate will normally

Accepted Answer

A)  decrease spending on consumer durables. 
B)  increase investment projects by firms. 
C)  decrease spending on new homes. 
D)  decrease the value of the dollar and lower net exports. 
A)  decrease spending on consumer durables. 
B)  increase investment projects by firms. 
C)  decrease spending on new homes. 
D)  decrease the value of the dollar and lower net exports.

Question 8

The Reserve Bank of Australia's main monetary policy target is

Accepted Answer

A)  the money supply. 
B)  the inflation rate. 
C)  real GDP. 
D)  the unemployment rate. 
A)  the money supply. 
B)  the inflation rate. 
C)  real GDP. 
D)  the unemployment rate.

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

The money demand curve is downward sloping because lower interest rates

Accepted Answer

A)  lower the opportunity cost of holding money and cause households and firms to switch from money to financial assets. 
B)  lower the opportunity cost of holding money and cause households and firms to switch from financial assets to money. 
C)  raise the opportunity cost of holding money and cause households and firms to switch from money to shares. 
D)  raise the opportunity cost of holding money and cause households and firms to switch from money to bonds. 
A)  lower the opportunity cost of holding money and cause households and firms to switch from money to financial assets. 
B)  lower the opportunity cost of holding money and cause households and firms to switch from financial assets to money. 
C)  raise the opportunity cost of holding money and cause households and firms to switch from money to shares. 
D)  raise the opportunity cost of holding money and cause households and firms to switch from money to bonds.

Question 14

The Reserve Bank of Australia can increase the cash rate by

Accepted Answer

A)  borrowing from the banks using reverse repurchase agreements. 
B)  purchasing bonds and securities, which increases banks' reserves. 
C)  lending cash to banks using repurchase agreements. 
D)  purchasing bonds and securities, which decreases banks' reserves. 
A)  borrowing from the banks using reverse repurchase agreements. 
B)  purchasing bonds and securities, which increases banks' reserves. 
C)  lending cash to banks using repurchase agreements. 
D)  purchasing bonds and securities, which decreases banks' reserves.

Question 15

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 16

A rise in the rate of interest on financial securities will lead to a movement downward along the money demand curve.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The Reserve Bank of Australia manages the supply of cash on a daily basis to

Accepted Answer

A)  ensure that banks have sufficient cash to meet the demand for funds. 
B)  sterilise deficits and surpluses of cash in the financial system. 
C)  ensure that there are no large injections of cash into or withdrawals of cash out of the financial system. 
D)  ensure that the interest rate changes to create equilibrium in the money market. 
A)  ensure that banks have sufficient cash to meet the demand for funds. 
B)  sterilise deficits and surpluses of cash in the financial system. 
C)  ensure that there are no large injections of cash into or withdrawals of cash out of the financial system. 
D)  ensure that the interest rate changes to create equilibrium in the money market.

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

The Reserve Bank of Australia engages in open market operations only when it wants to change interest rates.

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?

A rise in interest rates will lead to a negative income effect for households that are net borrowers.

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. _ _

If interest rates rise,this will _ the cost of buying new homes,so new homes will be purchased thereby reducing ___ expenditures.

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

Lowering the interest rate will normally

The Reserve Bank of Australia's main monetary policy target is

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

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

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.

If real GDP decreases,

The money demand curve is downward sloping because lower interest rates

The Reserve Bank of Australia can increase the cash rate by

The Reserve Bank of Australia uses open market operations

A rise in the rate of interest on financial securities will lead to a movement downward along the money demand curve.

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

The Reserve Bank of Australia manages the supply of cash on a daily basis to

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

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

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 17: Monetary Policy

The Reserve Bank of Australia engages in open market operations only when it wants to change interest rates.

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?

A rise in interest rates will lead to a negative income effect for households that are net borrowers.

If interest rates rise,this will _________ the cost of buying new homes,so ________ new homes will be purchased thereby reducing ___________ expenditures.

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

Lowering the interest rate will normally

The Reserve Bank of Australia's main monetary policy target is

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

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

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.

If real GDP decreases,

The money demand curve is downward sloping because lower interest rates

The Reserve Bank of Australia can increase the cash rate by

The Reserve Bank of Australia uses open market operations

A rise in the rate of interest on financial securities will lead to a movement downward along the money demand curve.

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

The Reserve Bank of Australia manages the supply of cash on a daily basis to

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

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

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

If interest rates rise,this will _ the cost of buying new homes,so new homes will be purchased thereby reducing ___ expenditures.

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