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QUIZ ABOUT MONETARY POLICY
ANS: MONETARY POLICY
•THE PROCESS BY WHICH THE MONETARY AUTHORITY OF A COUNTRY CONTROL THE SUPPLY OF MONEY, OFTEN TARGETING A RATE OF INTEREST FOR THE PURPOSE OF PROMOTING ECONOMIC GROWTH AND STABILITY
ANS: MONETARY THEORY
•PROVIDES INSIGHT INTO HOW TO CRAFT OPTIMAL MONETARY POLICY.
ANS: EXPANSIONARY POLICY
•TRADITIONALLY USED TO TRY TO COMBAT UNEMPLOYMENT IN A RECESSION BY LOWERING INTEREST RATES IN THE HOPE THAT EASY CREDIT WILL ENTICE BUSINESSES INTO EXPANDING.
ANS: CONTRACTIONARY POLICY
•INTENDED TO SLOW INFLATION IN ORDER TO AVOID THE RESULTING DISTORTIONS AND DETERIORATION OF ASSET VALUES
ANS: NET EXPORT
•THE VALUE OF A COUNTRY'S TOTAL EXPORTS MINUS THE VALUE OF ITS TOTAL IMPORTS.
ANS: TRADE DEFICIT
•REPRESENTS AN OUTFLOW OF DOMESTIC CURRENCY TO FOREIGN MARKETS.
ANS: TRADE SURPLUS
• REPRESENTS A NET INFLOW OF DOMESTIC CURRENCY FROM FOREIGN MARKETS, AND IS THE OPPOSITE OF A TRADE DEFICIT, WHICH WOULD REPRESENT A NET OUTFLOW.
ANS: BUDGET DEFICIT
• MOST COMMONLY USED TO REFER TO GOVERNMENT SPENDING RATHER THAN BUSINESS OR INDIVIDUAL SPENDING.
ANS: REQUIRED, RESERVE, RATIO
• THE PORTION (EXPRESSED AS A PERCENT) OF DEPOSITORS' BALANCES BANKS MUST HAVE ON HAND AS CASH
ANS: BOND
• A DEBT INVESTMENT IN WHICH AN INVESTOR LOANS MONEY TO AN ENTITY (CORPORATE OR GOVERNMENTAL) THAT BORROWS THE FUNDS FOR A DEFINED PERIOD OF TIME AT A FIXED INTEREST RATE.