Monetary Policy

Monetary policy aim to influence

• aggregate demand (AD)

• aggregate supply (AS)

Monetary policy is designed by

• government

• central bank

• commercial bank

Which of the following are the right approaches used by Central Bank to influence money supply?

• Required Reserved Ratio

• Discount Rate

• Open-Market Operations

• Taxation

If Central Bank raised the required reserve ratio, it would

• limit money supply

• increase money supply

• money supply remain unchanged

If Central Bank lower the required reserve ratio, it would

• limit money supply

• increase money supply

• money supply remain unchanged

If Central Bank lower the discount rate, it would

• limit money supply

• increase money supply

• money supply remain unchanged

If Central Bank conducts open market sales, it will

• limit money supply

• increase money supply

• money supply remain unchanged

During inflationary period, central bank will use

• expansionary monetary policy

• contractionary monetary policy

• supply side policy

During recession, central bank will use

• expansionary monetary policy

• contractionary monetary policy

• supply side policy

Business will invest more if

• the interest rate on loan is low

• the interest rate on loan is high

• expected returns on investment is high

• expected returns on investment is low