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Quiz > MonPol Reviewer > Flashcards

MonPol Reviewer Flashcards

1
Q

When the interest rates are falling the exchange rate moves in the same
direction as the industry so the price of exports.

A

Exchange Rate Channel

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2
Q

Troubles at one institution cause it to sell off assets, driving down the
prices of assets held by other institutions

A

Fire Sale

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3
Q

It means the rates of interest you’ll get if you go in to any commercial bank. Affected by many policy instruments like
reserve rate, repurchase agreements and treasury bills.

A

Market Rates

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4
Q

It takes for the authorities to observe changes in the
economy and to decide on a change in the official short-term rate of
interest

A

Policy Decision Lag

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5
Q

3 forms of Monetary Policy Change:

A

Interest Rate Control
Monetary Base Control
Direct Control

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6
Q

Process of getting saving into productive investment. These are the markets and institutions that do this. Include banks, investment banks, money market, mutual funds, pension funds. etc.

A

Financial Intermediation

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7
Q

A change in the monetary base in the
expectation that this will alter the money supply, or its rate of growth

A

Monetary Base Control

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8
Q

Equity and bond prices respond to new information about term
structure of discount rates, real growth prospects, and inflation
prospects. House and other property prices adjust (maybe slowly) to new borrowing costs.

A

Asset Prices Channel

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9
Q

A belief that the institution is in danger of becoming insolvent can cause depositors to _________ their funds and lenders to stop lending.

A

withdraw

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10
Q

less likely to either stop spending
if the interest rate is falling or they are less likely to not spend if they
say the interest rate is rising.

A

Expectation / Confidence Channel

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11
Q

Defaults and _____ in asset values can reduce the _____ of an institutions loans and securities.

A

change, value

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12
Q

Transmission Channels (4)

A

Market Interest Rate Channel
Asset Prices Channel
Expectation / Confidence Channel
Exchange Rate Channel

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13
Q

Effects of a Financial Crisis on PAE: All of these developments are likely to ________ PAE at a given level of Y.

A

reduce

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14
Q

A number of financial institutions are in danger of failing ang people lose confidence.

A

Financial Crisis

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15
Q

Possible policies to prevent financial crises: Regulation of risk-taking by financial institutions and _______ among financial institutions.

A

linkages

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16
Q

It takes for the change in the official rate to feed
through to other interest rates in the economy

A

Institutional Lag

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17
Q

Needed for changes in expenditure to be reflected
in changes in the rate of inflation, output, and employment.

A

Real Response

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18
Q

Possible policies to prevent financial crises:
D_______ I______

A

Deposit Insurance

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19
Q

A change in the short-term rate of interest at
which the central bank is willing to lend to the banking sector in order to
relieve any shortages of liquidity within the monetary system

A

Interest Rate Control

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20
Q

If the value of the loans and securities falls to the point where they are worth less than the institutions’ obligations to its depositors and lenders, the institution is _______.

A

Insolvent

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21
Q

The series of links between the monetary policy change and the changes in
output, employment and inflation

A

Transmission Mechanism of Monetary Policy

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22
Q

Possible policies to prevent financial crises: HIgher _____ requirements for financial institutions.

A

Capital

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23
Q

Possible policies to prevent financial crises: Using monetary and ________ ________ to keep the economy stable.

A

fiscal policy

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24
Q

Tima Lags of Monetary Policy (5)

A

Policy Decision Lag
Institutional Lag
Income Lag
Expenditure Lag
Real Response Lag

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25
Q

Troubles at one institution directly harm other institutions because of
loans, insurance contracts, and other direct links among them.

A

Linkage

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26
Q

Changes in the regulations that apply to banks in an
attempt to influence the rate of growth of their lending

A

Direct Control

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27
Q

required for interest rate changes to affect the disposable
income of households

A

Income Lag

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28
Q

Effects of a Financial Crisis on PAE: It may raise _______ standards or otherwise reduce the _______ of loans.

A

lending, availability

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29
Q

Required for changes in short-term and long-term
interest rates to affect the expenditure of households and firms

A

Expenditure Lag

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30
Q

Effects of a Financial Crisis on PAE: It may harm consumer and firm ________.

A

Confidence

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31
Q

Troubles at one institution reduce PAE and hence Y, and so
harm other institution

A

Macroeconomic

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32
Q

people expect
inflation to rise, they just turn spending behavior accordingly

A

Rational Expectations Theory

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33
Q

Policy actions and policy announcements have effects on expectations of future
growth in real activity and inflation.

A

Expectation / Confidence Channel

34
Q

confidence to the markets and people’s
expectations of what’s going on in the markets are also given
confidence and assurance.

A

Forward Guidance

35
Q

As interest rates go up probably the number of mortgage approvals would fail
and so the demand for housing would probably settle down a little bit and so
asset prices would also start to fall.

A

Asset Prices Channel

36
Q

Troubles at one institution create doubts about the health of
other institutions, even if there are no connections between them

A

Confidence

37
Q

Contagion of Crises across Financial Institutions (4)

A

Confidence
Linkage
Fire Sale
Macroeconomic

38
Q

Effects of a Financial Crises on PAE: It raises ________ spreads.

A

credit

39
Q

Used to pay for purchases and store wealth.
Has changed from gold/silver coins to paper currency to electronic funds.

A

Money

40
Q

6 Parts of Financial System

A

Money
Financial Instruments
Financial Markets
Financial Institutions
Government Regulatory Agencies
Central Banks

41
Q

Transfer resources from savers to investors and to transfer risk to those best equipped to bear it.

A

Financial Instruments

42
Q

Buy and sell financial instruments. Organized markets were created, like the New York Stock Exchange. Now transactions are mostly handled by electronic markets

A

Financial Markets

43
Q

Provide access to financial markets, collect information and provide services. It offers a huge assortment of financial products and services.

A

Financial Institutions

44
Q

Provide oversight for financial system. Provide wide-ranging financial regulation - rules and supervision.

A

Government Regulatory Agencies

45
Q

Monitor financial institutions and stabilize the economy. Began as large private banks to finance wars

A

Central Banks

46
Q

Control the availability of money and credit to ensure low inflation, high growth, and stability of financial system.

A

Central Banks

47
Q

5 Core Principles of Money and Banking

A

Time
Risk
Information
Markets
Stability

48
Q

_____ has value.
Affects the value of financial instruments

A

Time

49
Q

_______ is paid to compensate the lenders for the time the borrowers have their money

A

Interest

50
Q

________ requires compensation.
Higher the _____, the bigger the payment

A

Risk

51
Q

________ is the basis for decisions.
The more important the decision, the more ______ we gather.

A

Information

52
Q

________ and ________ of information is the foundation of the financial system

A

Collection, Processing

53
Q

________ determine prices and allocate resources. COre of the economic system.

A

Markets

54
Q

________ improves welfare.

A

Stability

55
Q

_______ ________ reduces risk and improves everyone’s welfare.
Gorws faster than an unstable one.

A

Stable Economy

56
Q

generally used to mean any sustained or continuing increase in price. A universal experience.

A

Inflation

57
Q

Economic plas and policies are intended to ______ the standards living of people.

A

Improve

58
Q

Negates the economic objective of improving the quality of life of people

A

Inflation

59
Q

Inflation Losers

A

Fixed incomes
Pensioners
Creditors

60
Q

People who have _____ _____ are severely affected during inflation. With increase prices, people who belong to this group would lose out.

A

Fixed Incomes

61
Q

Increased prices benefit of ______ from SSS/GSIS would result in a net loss.

A

Pensioners

62
Q

Inflation Losers. Fixed amount of principal and interest they lent out would now be valued less.

A

Creditors

63
Q

Inflation Gainers:

A

Flexible Income
Speculator
Debtors

64
Q

Inflation Gainers: as long there are demand for a product, their product would be sold.

A

Flexible Incomes

65
Q

These are the perceptive and lucky individuals are able to buy good at cheaper prices and then sell them later at a higher price.

A

Speculator

66
Q

______ usually borrwed before inflation would now have more value.

A

Debtors

67
Q

Types of Inflation (2)

A

Demand Pull Inflation
Cost-Push Inflation

68
Q

It is said to be if those who buys good and service desire to purchase goods greater than what the economy can produce

A

Demand Pull Inflation

69
Q

Type of inflation where increases in the costs of production push prices up

A

Cost-Push Inflation

70
Q

Measurement of Price Increases (3)

A

Consumer Price Index (CPI)
Retail Price Index (RPI)
Wholesale Price Index (WPI)

71
Q

Most popular and the most used measure as it reflects what happens to the living standards of the consumers.

A

Consumer Price Index (CPI)

72
Q

It is intended to provide a general measure of average monthly and annual changes in the retail prices of commodities commonly bought by the consumers, covering all income households.

A

Consumer Price Index (CPI)

73
Q

Designed to measure monthly changes of the prices at which retailers dispose of their goods to consumers and end-users.

A

Retial Price Index (RPI)

74
Q

Measures monthly changes in the general price level of commodities that flow into wholesale trade intermediaries.

A

Wholesale Price Indec (WPI)

75
Q

It is a statistical measure designed to show changes in a variable or group of related variables.

A

Index Number

76
Q

Simplest kinds of index numbers are called relatives: (3)

A

Price Relative (PR)
Quantity Relative (QR)
Value Relative (VR)

77
Q

3 Types of Price Index (3)

A

Price Relative
Unweighted Price Index
Weighted Price index

78
Q

simplest type because they compare the price, quantity, or value of only one commodity between two time periods or localities.

A

Price Relative

79
Q

Price Relative (3)

A

Price Relative PR = Pn/Po
Quantity Relative QR = Qn/Qo
Value Relative VR = (PR) x (QR)

80
Q

Unweighted Price Index (2)

A

Simple Aggregate Price Index (SAPI) SAPI = Z Pn / Z Po

Average Price Relatives (APR)
APR = z Pn/Po1 + Pn/Po2 + …. Pn/Pox / N

81
Q

Weighted Price Index (2)

A

Laspeyres Index
L.I. = Z (PnQo) / Z (PoQo)

Paasche Index
P.I. = Z (PnQn) / Z (PoQn)

Quiz (5 decks)

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