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2nd sem-finals > FINFINALS - MONETARY THEORY > Flashcards

FINFINALS - MONETARY THEORY Flashcards

1
Q

_______ is a general statement that describes the causes of changes in financial variables, such as money supply and interest rates, and the effects of these changes, changes in variables in the real sector, such as employment, production and prices.

A

Monetary theory

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2
Q

What are the variables of money theory?

A

money supply and interest rates.

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3
Q

The variables of money theory are money supply and interest rates. Once it changes it affects the _______, ________, and ________

A

Employment, production, and prices or inflation

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4
Q

________(in charge) controls the money supply and interest rate. BSP sa pilipinas

A

Central Bank -

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5
Q

________: rapid, excessive, and out-of-control general price increases in an economy.

A

Hyperinflation

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6
Q

_________ refers to the amount of goods or services which will be given in exchange for a unit of money.

A

The value of money

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7
Q

________ is synonymous with its power to purchase
economic goods.

A

The value of money

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8
Q

When money can buy more goods than before, it is said that the value money has _______ and the prices of commodities have _______.
Inversely, when the value of money has ______ and prices of commodities have ________.

A
  1. gone up
  2. gone down
  3. gone down
  4. gone up
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9
Q

TRUE OR FALSE: Prices and the value of money are related

A

true

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10
Q

True or False: As abrupt changes in the value of money affects the economy, the government finds it necessary to manage the monetary system

A

true

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11
Q

Enumerate the Important Theories about Money

A
  1. the Quantity Theory of Money
  2. the Income Theory
  3. the Transaction Theory
  4. the Cash-Balance Theory
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12
Q

_________: A theory that states the relationship between the quantity of money in an economy and the price level”

A

The Quantity Theory of Money:

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13
Q

Pag maraming pera, maraming gastos = mataas ang price. Pag konti ang pera, konti lang ang gasto = mababang presyo

A

The Quantity Theory of Money:

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14
Q

This theory was first developed in the late 1500s

A

The Quantity Theory of Money:

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15
Q

What theory states that If there is more money in the circulation, more spending will be made, and with less money, less spending.

A

The Quantity Theory of Money:

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16
Q

__________: The Theory recognizes that one person’s spending is another’s income and in analyzing the value of money, one must focus on the factors that affect income and spending in the economy.

A

The Income Theory:

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17
Q

This theory simply means that a person with an income will have a means to spend, and when he does, somebody is provided with an income, who in turn is in the position to spend and provide another with an income.

A

The Income Theory:

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18
Q

true or false: The income approach to monetary theory is an expression of a belief by some economists about the relationship between income and money.

A

true

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19
Q

What theory states the thought of the economist about “the changes in the economy are not influenced by the changes in the value of money or price levels” but through the interaction of the various aggregates like income, investments, savings and consumption

A

The Income Theory:

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20
Q

Enumerate the 4 various aggregates

A
  1. National Income
  2. Investments
  3. Savings
  4. Consumption
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21
Q

________: The transaction approach indicates that the value of money is determined by the forces of supply and demand over a period, rather than at a given time in a given market. The approach focuses on the spending of money.

A

The Transaction Theory

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22
Q

Which theory does Irving Fishers agrees that “one of normal effects of an increase in quantity of money is an exactly proportional increase in the general level of prices”

A

The Transaction Theory

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23
Q

This theory is a version of the quantity theory of money that focuses on the demand for money. The approach relates the determination of the value of money to the motives and decisions of individuals holding money.

A

The Cash-Balance Theory:

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24
Q

What is the result when people or organizations with income may decide to partly forego spending their money on consumption or investment.

A

Savings

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25
Q

Enumerate what affects the changes in consumption expenditures

A
  1. Changes in the holdings of money by the individual members of the public
  2. Changes in the availability of credit and effective rates of interest.
  3. Changes in the perception of the consumers regarding their current purchasing power.
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26
Q

__________involves the manipulation of financial variables by the central monetary authority in order to achieve the economy’s ultimate goals of full employment and balanced economic growth at stable prices.

A

Monetary Policy

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27
Q

Keywords when talking about Monetary Policy:

A

Money Supply
Interest Rates
Central Bank
Employment
Stable price/price or inflation

28
Q

________is a major instrument of macroeconomic policy which the government conducts through the management of the nation’s money, credit and banking system

A

Monetary policy

29
Q

True or False: monetary policy is viewed as an instrument to stabilize the economy.

A

true

30
Q

ENUMERATE THE TOOLS OF MONETARY POLICY

A
  1. OPEN MARKET OPERATIONS
  2. DISCOUNT POLICY
  3. RESERVE REQUIREMENTS
31
Q

It refers to the central bank’s activity of buying and selling of government securities in the open market.

A

OPEN MARKET OPERATIONS

32
Q

This tool is used to effect changes in interest rates.

A

OPEN MARKET OPERATIONS

33
Q

true or false: When the central bank makes open market purchases, the monetary base is expanded, thereby raising the money and lowering short-term interest rates.

A

true

34
Q

true or false: When the central bank makes open market sales, the monetary base shrinks, thereby lowering the money and raising short-term interest rates.

A

true

35
Q

The central bank lends money to depository institutions.

A

DISCOUNT POLICY

36
Q

_______is that which primarily involves changes in the discount rate.

A

DISCOUNT POLICY

37
Q

true or false: Any increase in discount loans adds to the monetary base and results to an expanded money supply.

A

true

38
Q

true or false: Any decrease in discount loans reduces the monetary base which results to a reduced money supply.

A

true

39
Q

The reduction of discount rates provides incentive to depository institution to obtain additional reserves thereby creating additional lending capacity. The result is that __________________________________________________________

A

credit becomes easier for the individual borrowers.

40
Q

The interest charged to the borrowers is called the _________

A

discount rate.

41
Q

__________ refer to the regulation making it obligatory for depository institutions ( those accepting deposits) to keep a certain fraction of their deposits in accounts with the central bank ( the BSP in the case of the Philippines)

A

Reserve requirements

42
Q

true or false: This reserve requirement helps the central bank exercise more precise control over the money supply.

A

true

43
Q

The reserve requirements are imposed by the BSP on the following:

A
  1. Against peso deposits
  2. Against foreign currency deposits
  3. Against unused balances of overdraft lines
44
Q

If the central bank wishes to reduce the availability of depository institutions to grant credit, it will ________the reserve requirements. If the central bank wants to expand credit availability, it will ________reserve requirements.

A
  1. increase
  2. lower
45
Q

WHAT ARE THE GOALS OF MONETARY POLICY

A
  1. high employment
  2. economic growth
  3. stable prices
  4. interest-rate stability
  5. stability of financial markets
  6. stability in foreign exchange markets
46
Q

Monetary policy is used to attain ________. The
resources of the monetary authorities can be
channeled towards the creation of more jobs.

A

high employment

47
Q

WHAT GOALS OF MONETARY POLICY STATES The financial system can give liberal financing terms to labor-intensive companies.

A

high employment

48
Q

It prevents ill effects of high unemployment. When the economy has many idle workers, idle resources like closed factories and unused machinery are prevalent, resulting in a reduction of output

A

High employment

49
Q

________ refers to “the steady process of increasing productive capacity of the economy, and hence of increasing national income”

A

Economic growth

50
Q

________ is usually measured as the annual rate of increase in the nation’s real gross national product (GNP).

A

Economic growth

51
Q

_______ is the total value of goods produced and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments

A

GNP

52
Q

________ is the value of the finished domestic goods and services produced within a nation’s borders.

A

Gross domestic product (GDP)

53
Q

______________is the value of all finished goods and services produced by a country’s citizens, both domestically and abroad.

A

gross national product (GNP)

54
Q

When ______________________, it brings uncertainty in the economic and economic growth is placed at a stand still.

A

prices of commodities rises

55
Q

TRUE OR FALSE: The Department of Economic Research of the Bangko Sentral ng Pilipinas maintains the idea that “price stability supports growth because it allows household and businesses (including export enterprises) to plan ahead and arrive at better informed decisions about their consumption, investment, savings and production needs.”

A

TRUE

56
Q

The _________ is a desirable feature of a growing economy.
.

A

stability of interest rates

57
Q

The prices of commodities are decided on the basis of cost which includes payments on interest for money borrowed. When ________, adjustments on prices becomes necessary. This brings difficulties however, for the seller cannot provide advances information on the price of his products

A

interest rates fluctuate

58
Q

When __________, it creates uncertainty among decision-makers and they find it hard decide on which moves to make.

A

interest rates fluctuate

59
Q

What goals of monetary policy when financial markets are firmly placed, savers are assured of a channel for investing their savings.

A

Stability of financial markets

60
Q

What goals of monetary policy when borrowers are, likewise, assured of a ready source of funds whenever such funds are needed for productive economic activities.

A

Stability of financial markets

61
Q

When this relationship is jeopardized by a financial crisis, ________ is affected. This leads to a sharp contraction in economic activity.

A

production

62
Q

What goals of monetary policy when foreign exchange markets affect the value of the Philippine Peso. When the value of the peso goes down in relation to other currencies, the prices of commodities tend to increase conversely, when the value of the peso rises against foreign currencies, Philippine businesses become less competitive with those abroad.

A

Stability in foreign exchange markets

63
Q

________ in the value of the peso makes it harder for exporters and importers to plan ahead. A desirable goal of monetary policy is to keep the value of peso as stable as possible.

A

Violent fluctuations

64
Q

______ and ________ are the treasure of our nation. From its early bead-like form to the paper notes and coins that we know today, our money has been a constant reminder of our journey through centuries as a people relating with one another and with other peoples of the world

A

Philippine coins and notes

65
Q

The _________ maintains a healthy level of international reserves to provide liquidity support in times of volatility in the exchange rate and balance of payments.

A

BSP

66
Q

LIST OF CENTRAL BANKS OF THE WORLD

A

(India) Reserve Bank of India
(Spain) European Central Bank
(Austria) European Central Bank
(South Korea) Bank of Korea
(USA) Federal Reserve
(Slovenia) European Central Bank
(Australia) Reserve Bank of Australia
(Singapore) Monetary Authority of Singapore
(UK)Bank of England
(Seychelles) Central Bank Of Seychelles
(Argentina) Central Bank of Argentina
(Saudi Arabia) Saudi Arabian Monetary Authority
(Switzerland) Swiss National Bank
(Russia) Bank of Russia
(Afghanistan) Bank of Afghanistan
(Qatar) Qatar Central Bank
(South Africa) South African Reserve Bank
(Philippines) Bangko Sentral ng Pilipinas
(Iran) Central Bank of Islamic Rep. of Iran
(Peru) Central Reserve Bank of Peru
(Bangladesh) Central Bank of Bangladesh
(New Zealand) Reserve Bank Of New Zealand
(Papua New Guinea) Bank of Papua New Guinea
(Netherlands) European Central Bank

2nd sem-finals (8 decks)

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