Bangko Sentral ng Pilipinas History Quiz
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Questions and Answers

What is the primary objective of the Bangko Sentral ng Pilipinas (BSP) as stated in R.A. 7653?

  • Promoting and maintaining monetary stability (correct)
  • Facilitating international trade agreements
  • Providing loans to individuals
  • Ensuring high savings rates
  • Which term refers to the function of the BSP as a lender of last resort?

  • Financial mediator
  • Micro-financier
  • Primary lender
  • Lender of last resort (correct)
  • How does the Philippine financial or monetary system transfer funds between savers and borrowers?

  • By informal community lending only
  • By direct government intervention
  • Through a network of markets and institutions (correct)
  • By restricting lending to large corporations only
  • What are the main classifications of banks in the Philippines according to the text?

    <p>Rural, thrift, and cooperative banks</p> Signup and view all the answers

    Which type of institutions are considered part of the thrift bank classification in the Philippine financial system?

    <p>Micro-finance institutions</p> Signup and view all the answers

    What is the formula for the Money Multiplier (mm) given a required reserve ratio (rr)?

    <p>mm = 1 / rr</p> Signup and view all the answers

    How do financial institutions like banks contribute to economic growth?

    <p>By allocating savings efficiently from savers to borrowers</p> Signup and view all the answers

    Which institution is NOT classified as a non-bank financial institution in the text?

    <p>Organized exchanges</p> Signup and view all the answers

    How does the Money Multiplier relate to changes in the money supply?

    <p>Money Multiplier increases money supply</p> Signup and view all the answers

    Which characteristic of financial institutions is crucial for providing users with flexibility and divisibility of funds?

    <p>Providing liquidity</p> Signup and view all the answers

    How have international monetary institutions affected the Philippine monetary system?

    <p>They have significantly impacted the Philippine monetary system especially pre-liberalization</p> Signup and view all the answers

    What is the main function of commodity money in an economy?

    <p>To serve as a medium of exchange</p> Signup and view all the answers

    What does 'face value' of paper bills refer to?

    <p>The amount of goods and services that can be bought with the bill</p> Signup and view all the answers

    What did specialized bankers offer to businessmen and traders according to the text?

    <p>Safekeeping their surplus money for a fee</p> Signup and view all the answers

    What evolved with the developments in commerce and industry based on the text?

    <p>Fractional reserve banking system</p> Signup and view all the answers

    According to John Maynard Keynes, what is the 'transaction motive' for holding money?

    <p>To enable payments for daily transactions like rent and bills</p> Signup and view all the answers

    What is one of the motives for holding money according to John Maynard Keynes, apart from the transaction motive?

    <p>Precautionary motive</p> Signup and view all the answers

    Study Notes

    Evolution of Money

    • Commodity money was used as a medium of exchange, where people used commodities such as salt, carabao, and shells.
    • The use of commodity money was followed by the use of paper bills, which have a face value that refers to the amount of goods and services that can be bought with it.

    Banking System

    • Specialized bankers offered safekeeping services for a fee, and later discovered that they could lend a portion of the surplus money to other people who needed funds and charge an interest in return.
    • The system of fractional reserve banking evolved over time, allowing banks to lend a portion of the deposited money.

    Demand for Money

    • The demand for money refers to the amount of goods and services that money can buy.
    • According to John Maynard Keynes, there are three motives for holding money:
      • Transaction motive: holding money to enable people and firms to pay for daily transactions.
      • Loan motive: holding money for loan purposes.
      • Speculative motive: holding money for speculative purposes.

    Financial Institutions

    • Financial institutions are important because they:
      • Allocate or channel savings efficiently from savers to borrowers.
      • Provide information, liquidity, and risk-sharing services.
      • Provide flexibility and divisibility of funds for users and sources of funds.
      • Are essential for ensuring capital formation and economic growth.
    • Non-bank institutions include:
      • Contractual savings institutions (e.g. insurance companies).
      • Investment institutions.
      • Securities market institutions (e.g. securities brokers and dealers, lending investors, organized exchanges).
      • Credit card companies.
      • Pawnshops.

    Money Creation

    • The Money Multiplier is the factor by which the money supply will change given a change in the monetary base or deposit.
    • The formula for the Money Multiplier is: mm = 1 / rr.
    • The formula for the Change in Money Supply is: M = mm x M.

    International Monetary Institutions and the Philippine Monetary System

    • The Philippine monetary system has been affected by international monetary institutions, particularly the International Monetary Fund (IMF) and the World Bank (WB).
    • The Bangko Sentral ng Pilipinas (BSP) was established on June 14, 1993, as a central monetary authority.
    • The primary objectives of the BSP are:
      • To maintain price stability (or fight inflation).
      • To promote and maintain monetary stability and convertibility of the peso.
    • The BSP is also a lender of last resort, providing necessary funds to ailing or bankrupt banks.

    Philippine Financial System

    • The Philippine financial system is a network of markets and institutions that transfer funds from individuals and groups who save money to individuals and groups who want to borrow money.
    • Banks are classified into:
      • Universal and commercial banks.
      • Rural banks.
      • Thrift banks, which include:
        • Savings and mortgage banks.
        • Private development banks.
        • Micro-finance institutions.
        • Stock savings.

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    Description

    Test your knowledge on the history and objectives of the Bangko Sentral ng Pilipinas (BSP) established through R.A. 7653 on June 14, 1993. Learn about its role in maintaining price stability, promoting monetary stability, and acting as the lender of last resort for ailing banks.

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