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Question 1

is concerned with the changes in the supply of money and credit.
It refers to the policy measures undertaken by the government or the central bank to influence the
availability, cost and use of money and credit with the help of monetary techniques to achieve specific
objectives.

Answer 1

Monetary policy

Question 2

Types of Monetary Policy

Answer 2

Contractionary policy

Question 3

is a monetary measure to reduce government spending or the rate of monetary
expansion by a central bank. It is a macroeconomic tool used to combat rising inflation.

Answer 3

contractionary policy

Question 4

macroeconomic tools designed to combat economic distortions caused by an
overheating economy.

Answer 4

Contractionary policies

Question 5

aim to reduce the rates of monetary expansion by putting some limits on the flow
of money in the economy.

Answer 5

Contractionary policies

Question 6

ypically issued during times of extreme inflation or when there has been a
period of increased speculation and capital investment fueled by prior expansionary policies.

Answer 6

Contractionary policies

Question 7

Tools Used for Contractionary Policies

Answer 7

Monetary Policy
Fiscal Policy

Question 8

Increasing interest rates reduces inflation by limiting the amount of active money circulating in the
economy.
• Increasing bank reserve requirements, the level of required reserves held by banks effectively decreases
the funds available for lending to businesses and consumers.

Answer 8

Monetary Policy

Question 9

Increasing taxes reduces the money supply and decreases the purchasing power of consumers.
• Reducing government spending in areas such as subsidies, welfare programs, contracts for public works, or
the number of government employees.

Answer 9

Fiscal Policy

Question 10

revolves around government decisions on taxation, spending, and borrowing

Answer 10

Fiscal policy r

Question 11

Four most important objectives of monetary policy

Answer 11

1. Stabilizing the Business Cycle:
2. Reasonable Price Stability:
3. Faster Economic Growth:
4. Exchange Rate Stability:

Question 12

Advantages of Monetary Policy

Answer 12

1. It can bring out the possibility of more investments coming in and consumers spending more.
2. It allows for the imposition of quantitative easing by the Central Bank.
3. It can lead to lower rates of mortgage payments.
4. It can promote low inflation rates.
5. It promotes transparency and predictability.
6. It promotes political freedom.

Question 13

Disadvantages of Monetary Policy

Answer 13

1. It does not guarantee economy recovery.
2. It is not that useful during global recessions.
3. Its ability to cut interest rates is not a guarantee.
4. It can take time to be implemented.
5. It could discourage businesses to expand.

Question 15

is the minimum lending rate of the central bank at which it rediscounts first class bills of exchange and
government securities held by the commercial banks

Answer 15

Bank Rate Policy:

Question 16

is a written order used primarily in international trade that binds one party to pay a fixed sum of
money to another party on demand or at a predetermined date.

Answer 16

Bill of exchange

Question 17

refer to sale and purchase of securities in the money market by the central bank. When
prices are rising and there is need to control them, the central bank sells securities.

Answer 17

Open Market Operations

Question 18

refers to trading in very short-term debt investments. It involves continuous large-volume trades
between institutions and traders at the wholesale level.

Answer 18

money market

Question 19

is one of the pillars of the global financial system. It involves overnight swaps of vast amounts of
money between banks and the U.S. government.

Answer 19

money marke

Question 20

are used to influence specific types of credit for particular purposes. They usually take the form
of changing margin requirements to control speculative activities within the economy.

Answer 20

Selective credit controls

Question 21

The bank rate policy is used as an important instrument to control inflation. The Bank
rate, also called as theCentral Bank rediscount rateis the rate at which the central bank buys or
redsicounts the eligible bills of exchange and other commercial papers presented by commercial banks
to build their reserves.

Answer 21

1.Bank Rate Policy

Question 22

also called as the Cash Reserve Ratio (CRR) is a certain
proportion of total demand and time deposits that the commercial banks are required to maintain in the form of cash
reserves with the central bank.

Answer 22

Variable Reserve Ratio

Question 23

is a bank account from which deposited funds can be withdrawn at any time,
without advance notice.

Answer 23

Demand deposit account

Question 24

is an interest-bearing bank account that has a pre-set date of maturity. A certificate of deposit (CD) is
the best-known example. The money must remain in the account for the fixed term in order to earn the stated interest
rate.

Answer 24

Time deposit

Question 25

are characterized by the sale and purchase of government securities and bonds by the central bank.

Answer 25

Open Market Operations

Question 26

applies to a range of investment products offered by a government body. For Americans, the most common types of government securities are those items issued by the U.S. Treasury in the form of Treasury bonds, bills, and notes.

Answer 26

Government Security

Question 27

Types of Treasury Securities

Answer 27

T-Bills T-Notes T-Bonds

Question 28

have the shortest range of maturities of all government bonds. Among bills auctioned on a regular schedule, there are five terms: four weeks, eight weeks, 13 weeks, 26 weeks, and 52 weeks. Another bill, the cash management bill, isn't auctioned on a regular schedule. It is issued in variable terms, usually of only a matter of days.

Answer 28

T-Bills

Question 29

These notes represent the middle range of maturities in the Treasury family, with maturity terms of two, three, five, seven, and 10 years currently available. The Treasury auctions two-year notes, three-year notes, five-year notes, and seven-year notes every month.

Answer 29

T-Notes

Question 30

Commonly referred to in the investment community as the “long bond,” T-bonds are essentially identical to T-notes except that they mature in 30 years. T-bonds are also issued at and mature at a $100 par value and pay interest semiannually. Treasury bonds are auctioned monthly

Answer 30

T-Bonds

Question 31

the holdings of currencies, precious metals, and other highly liquid assets used to redeem national currencies and bank deposits and to meet current and near-term financial obligations by a country’s central bank, government treasury, or other monetary authority.

Answer 31

Monetary Reserve?

Question 32

rves refer to the currency, precious metals, and other assets held by a central bank or other monetary authority.

Answer 32

Monetary reserves

Question 33

back up the value of national currencies by providing something of value that the currency can be exchanged or redeemed for by note holders and depositors.

Answer 33

Monetary reserves

Question 34

are part of a country's monetary aggregates, which are broad categories that define and measure the money supply in an economy.

Answer 34

Monetary reserves

Question 35

are the various measurements of the money supply in an economy. In the United States, they are used to evaluate the economic health and stability of the nation. In addition, the Federal Reserve uses them to implement its monetary policy.

Answer 35

Monetary aggregates

Question 36

are the cash minimums that financial institutions must have on hand in order to meet central bank requirements. This is real paper money that must be kept by the bank in a vault on-site or held in its account at the central bank. Cash reserves requirements are intended to ensure that every bank can meet any large and unexpected demand for withdrawals.

Answer 36

Bank reserves

Question 37

is a financial institution whose main source of funds is deposits from customers. A commercial bank is a type of depository institution, as is a credit union or a savings and loan association.

Answer 37

Depository Institution

Question 38

was negotiated in July 1944 by delegates from 44 countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire.

Answer 38

Bretton Woods agreement

Question 39

licy is primarily concerned with the management of interest rates and the total supply of money in circulation.

Answer 39

Monetary policy

Question 40

refers to the steps that governments take in order to influence the direction of the economy. But rather than encouraging or restricting spending by businesses and consumers, fiscal policy aims to target the total level of spending, the total composition of spending, or both in an economy.

Answer 40

Fiscal policy

Question 41

Governments can increase the amount of money they spend if they believe there is not enough business activity in an economy. This is often referred to as stimulus spending.

Answer 41

Government Spending Policies:

Question 42

action by the government to encourage private sector economic activity. To stimulate the economy, the government adopts targeted, expansionary policies.

Answer 42

Economic stimulus

Question 43

is a form of monetary policy in which a central bank, like the U.S. Federal Reserve, purchases securities in the open market to reduce interest rates and increase the money supply.

Answer 43

Quantitative easing

Question 44

creates new bank reserves, providing banks with more liquidity and encouraging lending and investment. In the United States, the Federal Reserve implements QE policies.

Answer 44

Quantitative easing

Question 45

When a government's expenditures exceed its revenues during a fiscal period, causing it to run a budget deficit.

Answer 45

Deficit Spending

Question 46

often refers to intentional excess spending meant to stimulate the economy.

Answer 46

Deficit spending

Question 47

British economist is the most well-known proponent of deficit spending as a form of economic stimulus.

Answer 47

John Maynard Keynes

Question 48

By increasing taxes, governments pull money out of the economy and slow business activity. Fiscal policy is typically used when the government seeks to stimulate the economy. It might lower taxes or offer tax rebates in an effort to encourage economic growth.

Answer 48

Government Tax Policies

Question 49

is the mistaken belief that there is a fixed amount of work available in the economy, and that increasing the number of workers decreases the amount of work available for everyone else, or vi

Answer 49

lump of labor fallacy

Question 50

posits that a country or economy only has a certain number of jobs to go around, and that excess labor will lead to unemployment.

Answer 50

Lump of Labor Fallacy