Group 3: Monetary Policy & Inflation Targeting

Question 1

is measures or actions taken by the central bank to regulate the money supply in the economy.

Answer 1

Monetary Policy

Question 2

It aims to stabilize the price level by influencing the timing, costs, and availability of money and credit, as well as other financial factors.

Answer 2

Monetary Policy

Question 3

Key objectives of monetary policy

Answer 3

1. Price Stability
2. Full Employment
3. Economic Growth

Question 4

is focused mainly on achieving a low and stable inflation, supportive of the economy’s growth objective.

Answer 4

Inflation targeting

Question 5

This approach entails the announcement of an explicit inflation target that the BSP promises to achieve over a given time period.

Answer 5

Inflation targeting

Question 6

If the BSP perceives the inflation forecast to exceed the target, then it implements __________________________ to bring down inflation to its target path.

Answer 6

contractionary monetary policy

Question 7

On the other hand, if the BSP sees the inflation forecast to be lower than the target or there is need to increase liquidity in the financial system, then it can implement _________________________.

Answer 7

expansionary monetary policy

Question 8

is the primary monetary policy instrument of the BSP.

Answer 8

reverse repurchase (RRP) or borrowing rate

Question 9

Contractionary Monetary Policy:

The central bank ______ interest rates to make borrowing more expensive, discouraging spending and investment.

Answer 9

Interest Rates: ↑

Question 10

Open Market Operations (CM)

The central bank \_\_\_\_\_\_\_\_\_  government bonds, reducing the money supply and putting upward pressure on interest rates.

Answer 10

sells

Question 11

Contractionary Monetary Policy:

The central bank _______ the amount of money banks must hold in reserve, limiting their ability to lend and tightening credit.

Answer 11

Reserve Requirements: ↑

Question 12

Expansionary Monetary Policy:

The central bank ________ interest rates to make borrowing cheaper, encouraging spending and investment.

Answer 12

Interest Rates: ↓

Question 13

Open Market Operations:
The central bank _______ government bonds, increasing the money supply and putting downward pressure on interest rates.

Answer 13

buys

Question 14

The central bank ____________ the amount of money banks must hold in reserve, allowing them to lend more and loosen credit.

Answer 14

Reserve Requirements: ↓

Question 15

Levels of Inflation

Answer 15

1. Hyperinflation
2. Galloping Inflation
3. Running Inflation
4. Walking Inflation
5. Chronic Inflation
6. Creeping Inflation

Question 16

occurs when prices skyrocket by more than 1000%

Answer 16

Hyperinflation

Question 17

is when inflation rises to 20% or more. Money loses value so quickly that business and employee income can’t keep up with costs and prices.

Answer 17

Galloping Inflation

Question 18

is a condition in an economy where the prices of goods and services increase by 10%to 20 %

Answer 18

Running Inflation

Question 19

is the inflation rate between 3% to 10%. The economic growth of the country is too accelerated to sustain.

Answer 19

Walking Inflation

Question 20

is an economic phenomenon occurring when a country experiences high inflation for a prolonged period

Answer 20

Chronic Inflation

Question 21

is a type of inflation that occurs slowly and gradually. It is a steady price increase over time, without sudden or drastic changes.

Answer 21

Creeping Inflation

Question 22

This occurs when the demand for goods and services exceeds the available supply. It’s often caused by increased consumer spending, government spending, or exports.

Answer 22

Demand Pull Inflation

Question 23

This happens when the cost of production increases, leading businesses to raise prices to maintain profit margins. Factors like rising wages, higher energy costs, or increased raw material prices can contribute to this type of inflation.

Answer 23

Cost-Push Inflation

Question 24

is the rate at which the overall level of prices for various goods and services in an economy rises over a period of time.

Answer 24

Inflation

Question 25

Types of Inflation

Answer 25

1. Demand-pull inflation
2. Cost-push inflation