Monetary Policy Quiz

What is the primary goal of Quantitative Easing (QE)?

• To increase interest rates

• To stimulate the economy by injecting liquidity

• To reduce inflation

• To control exchange rates

Which of the following is a limitation of expansionary monetary policy?

• Increased consumer confidence

• Interest insensitivity during economic downturns

• Higher investment

• Increased savings

What does the trilemma of international finance state?

• A country can control interest rates, exchange rates, and capital mobility simultaneously.

• A country can only achieve two out of three goals: free capital movement, a stable exchange rate, and independent monetary policy.

• A country must always prioritize interest rates over exchange rates.

• A country can only manage its exchange rates if it has a large domestic market.

What is a potential trade-off of contractionary monetary policy?

• Increased demand-pull inflation

• Higher consumer spending

• Demand-deficient unemployment

• Increased investment

In the context of Singapore's monetary policy, what is the primary objective of managing the exchange rate?

• To increase interest rates

• To stabilize the stock market

• To fight inflation and support economic growth

• To attract foreign direct investments

What happens when the central bank raises interest rates?

• Consumption and investment increase

• Aggregate demand decreases

• Currency depreciates

• Exports become cheaper

What is a characteristic of negative real interest rates?

• Nominal interest rates are higher than inflation rates.

• Borrowing becomes less attractive.

• Consumers are encouraged to spend rather than save.

• It leads to increased savings.

What is one of the main risks associated with aggressive interest rate cuts?

• Increased savings

• Asset bubbles

• Higher employment rates

• Decreased consumer spending

GRAMA stands for

Appreciation of SGD will lead to increase in economic growth.

• True

• False