Question 1

Which of the following is considered a benefit of inflation?

Accepted Answer

A)  Seignorage. 
B)  Money illusion. 
C)  The option of a negative real interest rate. 
D)  All of the above. 
E)  Both A and B. 
A)  Seignorage. 
B)  Money illusion. 
C)  The option of a negative real interest rate. 
D)  All of the above. 
E)  Both A and B. D

Question 2

Which of the following statements is true about the RBA's inflation target?

Accepted Answer

A)  The RBA has a zero inflation target. 
B)  The RBA has an explicit target of 2- 3 percent inflation over the course of the business cycle. 
C)  The RBA has an explicit upper bound of 3 percent inflation at all times. 
D)  The RBA has a crawling inflation target. 
E)  The RBA has an implicit target for inflation, that is not revealed to the general public. 
A)  The RBA has a zero inflation target. 
B)  The RBA has an explicit target of 2- 3 percent inflation over the course of the business cycle. 
C)  The RBA has an explicit upper bound of 3 percent inflation at all times. 
D)  The RBA has a crawling inflation target. 
E)  The RBA has an implicit target for inflation, that is not revealed to the general public. B

Question 3

According to the Reserve Bank Act of 1959, the RBA has a mandate to:

Accepted Answer

A)  maintain the stability of the currency of Australia. 
B)  maintain full employment. 
C)  achieve low inflation. 
D)  All of the above. 
E)  None of the above. 
A)  maintain the stability of the currency of Australia. 
B)  maintain full employment. 
C)  achieve low inflation. 
D)  All of the above. 
E)  None of the above. D

Question 4

An objective of quantitative easing is to generate:

Accepted Answer

A)  higher inflation expectations. 
B)  zero inflation expectations. 
C)  negative inflation expectations. 
D)  no change in inflation expectations. 
E)  lower inflation expectations. 
A)  higher inflation expectations. 
B)  zero inflation expectations. 
C)  negative inflation expectations. 
D)  no change in inflation expectations. 
E)  lower inflation expectations.

Question 5

Which of the following is true about Australia?

Accepted Answer

A)  There is no M2 in Australia. 
B)  There is no M1 in Australia. 
C)  There is no broad money in Australia. 
D)  There is no monetary aggregate in Australia. 
E)  There is no M3 in Australia. 
A)  There is no M2 in Australia. 
B)  There is no M1 in Australia. 
C)  There is no broad money in Australia. 
D)  There is no monetary aggregate in Australia. 
E)  There is no M3 in Australia.

Question 6

Credit easing is also known as:

Accepted Answer

A)  targeted easing. 
B)  quantitative easing. 
C)  qualitative easing. 
D)  Both A and B. 
E)  Both A and C. 
A)  targeted easing. 
B)  quantitative easing. 
C)  qualitative easing. 
D)  Both A and B. 
E)  Both A and C.

Question 7

Which of the following cannot be a member of the RBA Board?

Accepted Answer

A)  The Deputy Governor. 
B)  Prominent businessmen. 
C)  The Federal Treasurer. 
D)  An academic economist. 
E)  The secretary to the Federal Treasury. 
A)  The Deputy Governor. 
B)  Prominent businessmen. 
C)  The Federal Treasurer. 
D)  An academic economist. 
E)  The secretary to the Federal Treasury.

Question 8

Which of the following is an example of the "shoe- leather costs" of inflation?

Accepted Answer

A)  An artificial rise in the capital gains tax. 
B)  The need to take more trips to the bank. 
C)  A rise in the cost of primary raw materials, like leather for shoes. 
D)  Miscalculations due to money illusion. 
E)  The increase in bank transactions fees. 
A)  An artificial rise in the capital gains tax. 
B)  The need to take more trips to the bank. 
C)  A rise in the cost of primary raw materials, like leather for shoes. 
D)  Miscalculations due to money illusion. 
E)  The increase in bank transactions fees.

Question 9

The data for the last twenty- five years shows an almost perfect relationship between money growth and inflation when is used as the measure of the money supply.

Accepted Answer

A)  M3 
B)  a currency equivalent index 
C)  M1 
D)  either M1 or M3 
E)  None of the above. 
A)  M3 
B)  a currency equivalent index 
C)  M1 
D)  either M1 or M3 
E)  None of the above.

Question 10

Credit easing is designed to:

Accepted Answer

A)  lower the interest rates of short- term government bonds. 
B)  raise the interest rates of assets other than short- term government bonds. 
C)  lower the interest rates of assets other than short- term government bonds. 
D)  raise the interest rates of assets other than long- term government bonds. 
E)  lower the interest rates of assets other than long- term government bonds. 
A)  lower the interest rates of short- term government bonds. 
B)  raise the interest rates of assets other than short- term government bonds. 
C)  lower the interest rates of assets other than short- term government bonds. 
D)  raise the interest rates of assets other than long- term government bonds. 
E)  lower the interest rates of assets other than long- term government bonds.

Question 11

When the economy is in the liquidity trap, which of the following can provide a boost to consumption and investment?

Accepted Answer

A)  People expect higher interest rates. 
B)  People expect a higher exchange rate. 
C)  People expect higher inflation. 
D)  People expect higher unemployment benefits. 
E)  People expect higher taxes. 
A)  People expect higher interest rates. 
B)  People expect a higher exchange rate. 
C)  People expect higher inflation. 
D)  People expect higher unemployment benefits. 
E)  People expect higher taxes.

Question 12

Many agree that macro prudential tools are the right instruments to deal with bubbles, credit booms, or dangerous behaviour in the financial system. These are:

Accepted Answer

A)  rules that regulate trading activities in the financial markets. 
B)  rules that are aimed directly at employees and firms. 
C)  rules that regulate trading activities in the foreign exchange markets. 
D)  rules that protect the rights of consumers. 
E)  rules that are aimed directly at borrowers, lenders, and financial institutions. 
A)  rules that regulate trading activities in the financial markets. 
B)  rules that are aimed directly at employees and firms. 
C)  rules that regulate trading activities in the foreign exchange markets. 
D)  rules that protect the rights of consumers. 
E)  rules that are aimed directly at borrowers, lenders, and financial institutions.

Question 13

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n = nT and u < un. Given this information, we would expect that the RBA will:

Accepted Answer

A)  maintain its current stance of monetary policy. 
B)  implement a monetary expansion. 
C)  implement a monetary contraction. 
D)  implement a monetary contraction with a revaluation. 
E)  More information is needed to answer this question. 
A)  maintain its current stance of monetary policy. 
B)  implement a monetary expansion. 
C)  implement a monetary contraction. 
D)  implement a monetary contraction with a revaluation. 
E)  More information is needed to answer this question.

Question 14

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n = nT and u > un. Given this information, we would expect that the RBA will:

Accepted Answer

A)  maintain its current stance of monetary policy. 
B)  implement a monetary expansion. 
C)  implement a monetary contraction. 
D)  implement a monetary contraction with a devaluation. 
E)  More information is needed to answer this question. 
A)  maintain its current stance of monetary policy. 
B)  implement a monetary expansion. 
C)  implement a monetary contraction. 
D)  implement a monetary contraction with a devaluation. 
E)  More information is needed to answer this question.

Question 15

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n > nT and u < un. Given this information, we would expect that the RBA will:

Accepted Answer

A)  maintain its current stance of monetary policy. 
B)  implement a monetary expansion. 
C)  implement a monetary contraction. 
D)  implement a monetary contraction with a revaluation. 
E)  More information is needed to answer this question. 
A)  maintain its current stance of monetary policy. 
B)  implement a monetary expansion. 
C)  implement a monetary contraction. 
D)  implement a monetary contraction with a revaluation. 
E)  More information is needed to answer this question.

Question 16

Money growth targets have been abandoned in Australia in favour of an inflation target because:

Accepted Answer

A)  it is easier and transparent to communicate to the general public about a change in monetary policy. 
B)  there is no tight relation between monetary aggregate growth and inflation. 
C)  inflation targeting makes good sense in the medium run while allowing for output stabilisation in the short run. 
D)  All of the above. 
E)  Both A and C. 
A)  it is easier and transparent to communicate to the general public about a change in monetary policy. 
B)  there is no tight relation between monetary aggregate growth and inflation. 
C)  inflation targeting makes good sense in the medium run while allowing for output stabilisation in the short run. 
D)  All of the above. 
E)  Both A and C.

Question 17

An asset is considered liquid if it:

Accepted Answer

A)  is indexed to the rate of inflation. 
B)  acts as a medium of exchange. 
C)  can be exchanged for money at little cost. 
D)  can be used as a store of value. 
E)  has a guaranteed rate of return. 
A)  is indexed to the rate of inflation. 
B)  acts as a medium of exchange. 
C)  can be exchanged for money at little cost. 
D)  can be used as a store of value. 
E)  has a guaranteed rate of return.

Question 18

Monetary policy has long- run effects on which of the following?

Accepted Answer

A)  The level of output and the price level. 
B)  The level of output. 
C)  The level of output but not its composition. 
D)  Both the level and composition of output. 
E)  No policy effect on the output level. 
A)  The level of output and the price level. 
B)  The level of output. 
C)  The level of output but not its composition. 
D)  Both the level and composition of output. 
E)  No policy effect on the output level.

Question 19

Explain what is meant by shoe- leather costs.

Accepted Answer

In the medium run, an increase in inflat

Question 20

Since 1993, the RBA has adopted:

Accepted Answer

A)  inflation targeting. 
B)  real output growth targeting. 
C)  real money growth targeting. 
D)  nominal output growth targeting. 
E)  money growth targeting. 
A)  inflation targeting. 
B)  real output growth targeting. 
C)  real money growth targeting. 
D)  nominal output growth targeting. 
E)  money growth targeting.

Exam 24: Monetary Policy: a Summing up

Which of the following is considered a benefit of inflation?

Which of the following statements is true about the RBA's inflation target?

According to the Reserve Bank Act of 1959, the RBA has a mandate to:

An objective of quantitative easing is to generate:

Which of the following is true about Australia?

Credit easing is also known as:

Which of the following cannot be a member of the RBA Board?

Which of the following is an example of the "shoe- leather costs" of inflation?

The data for the last twenty- five years shows an almost perfect relationship between money growth and inflation when is used as the measure of the money supply.

Credit easing is designed to:

When the economy is in the liquidity trap, which of the following can provide a boost to consumption and investment?

Many agree that macro prudential tools are the right instruments to deal with bubbles, credit booms, or dangerous behaviour in the financial system. These are:

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n = nT and u < un. Given this information, we would expect that the RBA will:

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n = nT and u > un. Given this information, we would expect that the RBA will:

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n > nT and u < un. Given this information, we would expect that the RBA will:

Money growth targets have been abandoned in Australia in favour of an inflation target because:

An asset is considered liquid if it:

Monetary policy has long- run effects on which of the following?

Explain what is meant by shoe- leather costs.

Since 1993, the RBA has adopted:

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Markets: the Islm Model

The Labour Market

Putting All Markets Together: the Asad Model

The Phillips Curve, the Natural Rate of Unemployment and Inflation

The Crisis

The Facts of Growth

Saving, Capital Accumulation and Output

Technological Progress and Growth

Technological Progress: the Short, the Medium and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations, Consumption and Investment

Expectations, Output and Policy

Openness in Goods and Financial Markets

The Goods Market

Output, the Interest Rate and the Exchange Rate

Exchange Rate Regimes

Should Policy-Makers Be Restrained

Fiscal Policy: a Summing up

Epilogue: the Story of Macroeconomics

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