Monetary Policy NZ

The government controls the OCR.

• True

• False

• It depends

If the OCR increases, borrowing will...

• increase

• decrease

• not change

If the OCR increases, saving will...

• increase

• decrease

• not change

If saving increases and borrowing decreases, AD will...

• increase

• decrease

• not change

A decrease in OCR will cause the following change in the NZD:

• Decrease demand and increase supply for NZD: depreciation

• Increase demand and decrease supply for NZD: depreciation

• Neither.

A depreciation of the NZD will make goods overseas more expensive. What happens to AS?

• Increases: more likely to make in NZ

• Decreases: cost of imported raw materials increases

Lowering the OCR will (in the short run)...

• Increase AD and AS

• Decrease AD and AS

• Increase AD and decrease AS

• Decrease AD and increase AS

What are the goals of monetary policy according to the remit of the RBNZ?

• Decrease unemployment and inflation

• Keep inflation between 1-3%

• Increase economic growth

• Keep inflation between 1-3% and sustain maximum sustainable employment

Why might the RBNZ lower the OCR?

• To decrease inflation

• To increase inflation

• To increase unemployment

• To increase economic growth

Why might the RBNZ lower the OCR?

• To cause deflation

• To increase unemployment

• To decrease unemployment

• To increase economic growth