Monetary Policy Questions from EA

Monetary Policy Questions from EA

12th Grade

10 Qs

quiz-placeholder

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Monetary Policy Questions from EA

Monetary Policy Questions from EA

Assessment

Quiz

Business

12th Grade

Hard

Created by

Elizabeth Walsh

Used 5+ times

FREE Resource

10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Inflation targeting

guarantees that inflation remains within a band of 2% to 3%

assists with managing an economy’s inflation expectations

encourages the banking sector to pass on rate changes

is most effective with cost-push inflation issues

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If the Reserve Bank of Australia increases interest rates relative to our trading partners, it will cause (ceteris paribus)

a depreciating effect on the exchange rate.

a reduction in the federal budget deficit.

an inflow of foreign financial capital.

a decrease in export prices.

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Australia’s monetary policy is less effective when the economy is

recovering, because excess production capacity limits employment growth.

in a trough, because the average propensity to save is high due to lower consumer confidence.

in a downturn, because political considerations discourage potential reductions in the cash rate.

booming, because businesses are concerned that interest rates will rise so they reduce their investments.

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Assume there is an increase in Australians preferring to rent rather than buy their own home. The effect on the transmission mechanism would be (ceteris paribus)

a change to how the transmission mechanism is channelled.

a decrease in the effective size of the transmission mechanism.

quicker interest rate changes so banks maintain their profit levels.

a shorter time frame for the cash rate to be transmitted throughout the economy.

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Assume a central bank is concerned that house prices have increased in the past year. Which situation would be most likely to encourage the central bank to increase the official interest rate?

Inflation increases from below 1% and housing approvals continue to rise.

There is a short-term increase in house purchases causing current consumption to fall.

There is a continuous increase in both house prices and consumer debt relative to wage growth.

The housing price index increases in capital cities and does not change in other populated areas.

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The results of a cash rate decision are a reduction in interest payments on debt and an increase in the amount of income available for households and businesses. Which channel of the transmission mechanism is this cash rate change an example of?

savings and investment

asset prices and wealth

sector income

cash flow

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In a situation where monetary policy is changed, the transmission mechanism will depend on:

changes to the structure of the economy over time.

asset and wealth values of high-income households.

the substitutability of imports and domestic goods and services.

whether households and firms respond by saving more now or later.

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