Question 1

The interest rate is an example of an 'intermediate' policy target.

Accepted Answer

A) True 
 B)False

Question 2

By removing or easing the 'captive market' requirements on financial institutions which forced them to hold government bonds, it gave the institutions the ability to trade in the securities.

Accepted Answer

A) True 
 B)False

Question 3

By introducing ceilings on bank lending and deposit rates, it promoted interest rate flexibility.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is NOT a means by which the RBA can adjust the amount of cash in the financial system each day?

Accepted Answer

A)  Issuing 'repos'. 
B)  Altering the velocity of money. 
C)  Selling government bonds. 
D)  Buying foreign exchange. 
A)  Issuing 'repos'. 
B)  Altering the velocity of money. 
C)  Selling government bonds. 
D)  Buying foreign exchange.

Question 5

Under a fixed exchange rate regime:

Accepted Answer

A)  money supply remains fixed. 
B)  purchases of foreign currency by the RBA will withdraw cash from the system. 
C)  the exchange rate is determined by supply and demand. 
D)  the authorities have little control over their transactions in the foreign exchange market. 
A)  money supply remains fixed. 
B)  purchases of foreign currency by the RBA will withdraw cash from the system. 
C)  the exchange rate is determined by supply and demand. 
D)  the authorities have little control over their transactions in the foreign exchange market.

Question 6

Which of the following theories explains the shape of the yield curve?

Accepted Answer

A)  Expectations theory. 
B)  Segmented market theory. 
C)  Liquidity or risk premium. 
D)  All of the above. 
A)  Expectations theory. 
B)  Segmented market theory. 
C)  Liquidity or risk premium. 
D)  All of the above.

Question 7

What are asset price bubbles?

Accepted Answer

An asset price bubble is the i

Question 8

The 'real after- tax' rate of interest is equal to: r - (1- t)P where r is the nominal rate of interest, t is the investor's marginal tax rate and P is the inflation rate.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following variables appears in the balance sheet of the RBA?

Accepted Answer

A)  ESA. 
B)  FX. 
C)  Australian dollar securities. 
D)  All of the above. 
A)  ESA. 
B)  FX. 
C)  Australian dollar securities. 
D)  All of the above.

Question 10

For monetary policy based on the money stock to succeed, we need the money multiplier to vary significantly in response to policy actions.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following best describes the 'real' interest rate?

Accepted Answer

A)  The rate of return on an investment expressed in monetary terms. 
B)  The rate of return after deducting tax liability. 
C)  The effective return after taking into account compounding effects. 
D)  The return on an investment after the effects of inflation are taken into account. 
A)  The rate of return on an investment expressed in monetary terms. 
B)  The rate of return after deducting tax liability. 
C)  The effective return after taking into account compounding effects. 
D)  The return on an investment after the effects of inflation are taken into account.

Question 12

The sector of the economy most likely to demand funds from the capital market rather than supply them is the____________ sector.

Accepted Answer

A)  household 
B)  corporate 
C)  government 
D)  overseas 
A)  household 
B)  corporate 
C)  government 
D)  overseas

Question 13

Monetary policy based on monetary aggregates operates first on income (Y), which then impacts on money supply (M), which in turn affects the money base (MB).

Accepted Answer

A) True 
 B)False

Question 14

The Hong Kong dollar is pegged to the UK pound sterling.

Accepted Answer

A) True 
 B)False

Question 15

In Australia, business borrowers receive a full tax deduction but individual borrowers receive no deduction.

Accepted Answer

A) True 
 B)False

Question 16

The 'real exchange rate' is defined as:

Accepted Answer

A)  the nominal exchange rate corrected for inflation across two countries. 
B)  the actual trading rate in the market. 
C)  the future exchange rate that can be fixed using the forward market. 
D)  the average exchange rate with many countries weighted according to their share of Australia's trade. 
A)  the nominal exchange rate corrected for inflation across two countries. 
B)  the actual trading rate in the market. 
C)  the future exchange rate that can be fixed using the forward market. 
D)  the average exchange rate with many countries weighted according to their share of Australia's trade.

Question 17

The set of channels through which changes in monetary policy instruments affect the economy is known as the:

Accepted Answer

A)  regulatory structure. 
B)  transmission mechanism. 
C)  velocity of money. 
D)  money base. 
A)  regulatory structure. 
B)  transmission mechanism. 
C)  velocity of money. 
D)  money base.

Question 18

Over the period 1985 to 1995, Australia had a 'crawling peg' exchange rate regime.

Accepted Answer

A) True 
 B)False

Question 19

A normal yield curve is:

Accepted Answer

A)  downward sloping. 
B)  flat. 
C)  upward sloping. 
D)  none of the above. 
A)  downward sloping. 
B)  flat. 
C)  upward sloping. 
D)  none of the above.

Question 20

Discuss the transmission mechanism of monetary policy.

Accepted Answer

The transmission mechanism of monetary p

The interest rate is an example of an 'intermediate' policy target.

By removing or easing the 'captive market' requirements on financial institutions which forced them to hold government bonds, it gave the institutions the ability to trade in the securities.

By introducing ceilings on bank lending and deposit rates, it promoted interest rate flexibility.

Which of the following is NOT a means by which the RBA can adjust the amount of cash in the financial system each day?

Under a fixed exchange rate regime:

Which of the following theories explains the shape of the yield curve?

What are asset price bubbles?

The 'real after- tax' rate of interest is equal to: r - (1- t)P where r is the nominal rate of interest, t is the investor's marginal tax rate and P is the inflation rate.

Which of the following variables appears in the balance sheet of the RBA?

For monetary policy based on the money stock to succeed, we need the money multiplier to vary significantly in response to policy actions.

Which of the following best describes the 'real' interest rate?

The sector of the economy most likely to demand funds from the capital market rather than supply them is the____________ sector.

Monetary policy based on monetary aggregates operates first on income (Y), which then impacts on money supply (M), which in turn affects the money base (MB).

The Hong Kong dollar is pegged to the UK pound sterling.

In Australia, business borrowers receive a full tax deduction but individual borrowers receive no deduction.

The 'real exchange rate' is defined as:

The set of channels through which changes in monetary policy instruments affect the economy is known as the:

Over the period 1985 to 1995, Australia had a 'crawling peg' exchange rate regime.

A normal yield curve is:

Discuss the transmission mechanism of monetary policy.

Financial Markets

Debt Securities and Markets

Introduction to Financial Calculations

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

The Foreign Exchange Market

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Foreign Exchange Risk

Managing Interest Rate Risk

Filters

Exam 7: Interest Rates, the Yield Curve and Monetary Policy

The interest rate is an example of an 'intermediate' policy target.

By removing or easing the 'captive market' requirements on financial institutions which forced them to hold government bonds, it gave the institutions the ability to trade in the securities.

By introducing ceilings on bank lending and deposit rates, it promoted interest rate flexibility.

Which of the following is NOT a means by which the RBA can adjust the amount of cash in the financial system each day?

Under a fixed exchange rate regime:

Which of the following theories explains the shape of the yield curve?

What are asset price bubbles?

The 'real after- tax' rate of interest is equal to: r - (1- t)P where r is the nominal rate of interest, t is the investor's marginal tax rate and P is the inflation rate.

Which of the following variables appears in the balance sheet of the RBA?

For monetary policy based on the money stock to succeed, we need the money multiplier to vary significantly in response to policy actions.

Which of the following best describes the 'real' interest rate?

The sector of the economy most likely to demand funds from the capital market rather than supply them is the____________ sector.

Monetary policy based on monetary aggregates operates first on income (Y), which then impacts on money supply (M), which in turn affects the money base (MB).

The Hong Kong dollar is pegged to the UK pound sterling.

In Australia, business borrowers receive a full tax deduction but individual borrowers receive no deduction.

The 'real exchange rate' is defined as:

The set of channels through which changes in monetary policy instruments affect the economy is known as the:

Over the period 1985 to 1995, Australia had a 'crawling peg' exchange rate regime.

A normal yield curve is:

Discuss the transmission mechanism of monetary policy.

Financial Markets

Debt Securities and Markets

Introduction to Financial Calculations

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

The Foreign Exchange Market

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Foreign Exchange Risk

Managing Interest Rate Risk

Filters