Podcast
Questions and Answers
What was a primary reason for Intel's departure from the Philippines in 2009?
What was a primary reason for Intel's departure from the Philippines in 2009?
What does the text suggest is crucial for high-tech companies like Intel beyond fiscal incentives?
What does the text suggest is crucial for high-tech companies like Intel beyond fiscal incentives?
What percentage of college graduates in the Philippines last year were engineers and technology-related graduates?
What percentage of college graduates in the Philippines last year were engineers and technology-related graduates?
How does the educational output of the Philippines compare to that of Vietnam regarding master’s degree graduates?
How does the educational output of the Philippines compare to that of Vietnam regarding master’s degree graduates?
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What gap does the text suggest contributes to the challenges faced by high-tech companies in the Philippines?
What gap does the text suggest contributes to the challenges faced by high-tech companies in the Philippines?
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What does contractionary monetary policy aim to achieve?
What does contractionary monetary policy aim to achieve?
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How does a higher interest rate affect foreign investment?
How does a higher interest rate affect foreign investment?
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What is the primary purpose of monetary policy?
What is the primary purpose of monetary policy?
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What effect does expansionary monetary policy have on interest rates?
What effect does expansionary monetary policy have on interest rates?
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Which factor is considered when changing monetary policy?
Which factor is considered when changing monetary policy?
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What does currency volatility measure?
What does currency volatility measure?
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What is a carry trade?
What is a carry trade?
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What occurs when a currency's demand increases?
What occurs when a currency's demand increases?
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Study Notes
Bank Rate / Interest Rate
- The interest rate a nation's central bank uses to lend money to domestic banks.
- Usually for short-term loans.
- Central banks manage interest rates to influence economic activity.
Monetary Policy
- The control of a nation's money supply.
- Uses tools like interest rate adjustments.
- Influenced by a nation's GDP and interest policy.
Types of Monetary Policy
- Contractionary Policy: Increases interest rates, limits money supply, slows growth, and decreases inflation.
- Expansionary Policy: Decreases interest rates, allows for growth and economic expansion, makes savings less attractive, encourages spending and borrowing.
Impacts of High and Low Interest Rates
- High: Attracts foreign investors seeking higher returns, increases currency demand, cheapens imports, increases exports, and can lead to Carry Trades.
- Low: Defers foreign investors, decreases currency demand, makes imports more expensive, makes exports cheaper, and can create risks for Carry Trades.
Currency Volatility
- Refers to the rapid and unpredictable changes in currency values.
- Measured by the dispersion of exchange rate changes around the mean.
- Larger numbers indicate greater volatility over a period of time.
Case Study: Japanese Yen Collapse
- The Japanese Yen is one of the most heavily traded currencies globally.
- The yen's value significantly dropped in 2022, linked to multiple factors: Bank of Japan's ultra-low interest rates, increasing US interest rates, and a stronger US dollar.
Intel's Experiences in Costa Rica and the Philippines
- Intel considered investments in Costa Rica but found issues with infrastructure services, particularly roads, ports, and the airport.
- Despite a corruption-free government, Intel expressed concerns about telecommunications and electricity services.
- Intel exited the Philippines in 2009 due to high electricity prices and a weak science and technology environment.
- High-tech companies need a strong science and technology environment to support their human resources and research and development.
- The Philippines' educational system has resource gaps, leading to low levels of science and technology graduates, impacting the ability to support high-tech companies.
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Description
This quiz covers the key concepts of interest rates and monetary policy, focusing on how central banks manage economic activity through these tools. It also explores the types of monetary policy and the impacts of varying interest rates on the economy. Test your understanding of these fundamental economic principles.
