Podcast
Questions and Answers
What does inflation erode?
What does inflation erode?
- Government regulations
- Investment opportunities
- Interest rates
- Purchasing power (correct)
What is the primary objective of the Bangko Sentral?
What is the primary objective of the Bangko Sentral?
- Encourage foreign investment
- Maximize profit for banks
- Maintain price stability (correct)
- Reduce unemployment to zero
Which of the following is NOT a method used by the central bank to control price stability?
Which of the following is NOT a method used by the central bank to control price stability?
- Moral Suasion
- Fiscal Policy (correct)
- Open Market Operations
- Reverse repurchase facility
What type of monetary policy intends to decrease the level of liquidity in the economy?
What type of monetary policy intends to decrease the level of liquidity in the economy?
What is a reverse repurchase facility?
What is a reverse repurchase facility?
Which of the following is an effect of expansionary monetary policy?
Which of the following is an effect of expansionary monetary policy?
What is one of the roles of monetary policy actions by the Bangko Sentral?
What is one of the roles of monetary policy actions by the Bangko Sentral?
How does inflation typically behave in an economy experiencing expansionary monetary policy?
How does inflation typically behave in an economy experiencing expansionary monetary policy?
What is the primary purpose of moral suasion in monetary policy?
What is the primary purpose of moral suasion in monetary policy?
How does the central bank use open market operations (OMO)?
How does the central bank use open market operations (OMO)?
What do statutory liquidity facilities entail?
What do statutory liquidity facilities entail?
What is the purpose of rediscounting in monetary policy?
What is the purpose of rediscounting in monetary policy?
What impact do changes in reserve requirements have on the banking system?
What impact do changes in reserve requirements have on the banking system?
What characterizes an expansionary fiscal policy?
What characterizes an expansionary fiscal policy?
What is the outcome of a contractionary fiscal policy?
What is the outcome of a contractionary fiscal policy?
What was the estimated government revenue from 'sin' products in 2020?
What was the estimated government revenue from 'sin' products in 2020?
Flashcards
Inflation
Inflation
A general increase in the prices of goods and services in an economy over time.
Monetary Policy
Monetary Policy
Actions taken by a central bank to influence the economy's price level and liquidity.
Expansionary Monetary Policy
Expansionary Monetary Policy
Monetary policy that increases the money supply to boost economic activity, potentially leading to higher inflation.
Contractionary Monetary Policy
Contractionary Monetary Policy
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Reverse Repurchase Facility
Reverse Repurchase Facility
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Open Market Operations (OMO)
Open Market Operations (OMO)
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BSP Mandate
BSP Mandate
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Monetary Stability
Monetary Stability
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Moral Suasion
Moral Suasion
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Statutory Liquidity Facilities
Statutory Liquidity Facilities
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Rediscounting
Rediscounting
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Reserve Requirement
Reserve Requirement
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Expansionary Fiscal Policy
Expansionary Fiscal Policy
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Contractionary Fiscal Policy
Contractionary Fiscal Policy
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Fiscal Policy
Fiscal Policy
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Study Notes
Monetary Policy
- Monetary policy aims to control the general price level and liquidity in the economy.
- It's a central bank tool to influence the timing, cost, and availability of money and credit.
- The core objective is price stability.
Inflation
- Inflation is a sustained increase in the general price level of goods and services in an economy.
- It erodes purchasing power meaning your money buys less.
- Example data shows inflation in the Philippines for 2010, 2012, 2015, and 2023.
BSP Mandate
- The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Philippines.
- The primary goal is maintaining price stability for a balanced and sustained economic growth and employment.
- It promotes and maintains monetary stability and the convertibility of the Peso.
Types of Monetary Policy
- Expansionary Monetary Policy: Aims to increase liquidity/money supply to boost economic growth but potentially leads to higher inflation.
- Contractionary Monetary Policy: Aims to decrease liquidity/money supply to manage inflation but may potentially slow economic growth.
Tools of Monetary Policy
- Reverse repurchase facility (reverse repo):Â Selling securities with an agreement to buy them back later at a higher price.
- Moral Suation: influencing banks to conduct operations aligning with monetary goals, not necessarily maximizing profits.
- Open Market Operations (OMO): Buying or selling government securities to adjust liquidity in the system.
- Standing Liquidity Facilities: Allowing banks to borrow money from the BSP to meet reserve requirements.
- Rediscounting: Banks borrow money from the BSP using their borrowers' promissory notes as collateral.
- Reserve Requirements: Percentage of deposits banks are required to keep in reserves. This tool affects money supply significantly.
Fiscal Policy
- Fiscal policy uses government spending and taxation to influence the economy.
- Expansionary Fiscal Policy: Lower taxes or increased spending to stimulate aggregate demand and economic growth.
- Contractionary Fiscal Policy: Raise taxes or cut spending to curb aggregate demand and control inflation.
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