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Questions and Answers
What is the primary objective of the BSP's monetary policy?
What is the primary objective of the BSP's monetary policy?
- To regulate the supply of money without regard to inflation
- To promote price stability conducive to balanced economic growth (correct)
- To promote economic growth at all costs
- To ensure maximum employment year-round
Which monetary policy instrument does the BSP primarily use to influence the economy?
Which monetary policy instrument does the BSP primarily use to influence the economy?
- Government spending programs
- Foreign exchange interventions
- Taxation policy adjustments
- Reverse repurchase (RRP) or borrowing rate (correct)
What does contractionary monetary policy aim to achieve?
What does contractionary monetary policy aim to achieve?
- Enhance liquidity in the banking system
- Stabilize employment rates irrespective of inflation
- Increase spending through lower interest rates
- Slow down the economy when inflation exceeds target (correct)
Which of the following is NOT a key objective of monetary policy?
Which of the following is NOT a key objective of monetary policy?
How does the BSP implement changes in the economy during an expansionary monetary policy?
How does the BSP implement changes in the economy during an expansionary monetary policy?
What effect do reserve requirements have on a bank's ability to lend?
What effect do reserve requirements have on a bank's ability to lend?
Which framework did the BSP adopt in January 2002 for its monetary policy?
Which framework did the BSP adopt in January 2002 for its monetary policy?
Interest rate adjustments by the central bank primarily influence which of the following?
Interest rate adjustments by the central bank primarily influence which of the following?
Study Notes
Monetary Policy Overview
- Central bank measures regulate the money supply in the economy.
- Aims to stabilize price levels through control over timing, costs, and availability of money and credit.
- Key objectives include price stability, full employment, and economic growth.
Inflation Targeting Framework
- The primary goal of BSP's monetary policy is to ensure price stability for balanced economic growth.
- Implemented the inflation targeting framework in January 2002, according to Republic Act 7653.
- Utilizes various monetary policy instruments based on inflation outlook assessments.
Monetary Policy Instruments
- Interest Rates: Adjusting these can influence borrowing costs and consumer spending.
- Open Market Operations: Involves buying or selling government securities to affect money supply.
- Reserve Requirements: Altering the amount banks must hold in reserve influences their lending activity.
Types of Monetary Policies
Contractionary Monetary Policy
- Implemented when inflation forecast exceeds the target, aiming to reduce money supply and control inflation.
Expansionary Monetary Policy
- Used when the BSP identifies low inflation forecasts, aimed at increasing money supply to stimulate the economy.
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Description
This quiz covers the concepts of monetary policy, focusing on inflation targeting and the actions taken by central banks to regulate money supply. It is designed for a deeper understanding of economic stabilization techniques and their implications. Ideal for students studying finance or economics.
