UNIT IX: The Philippine Monetary Policy

Question 2

anything that is generally accepted in payment for goods or services or in the repayment of debts.

Answer 2

money

Question 3

FUNCTIONS OF MONEY

Answer 3

-medium of exchange (to pay for goods and services, in the form of currency and checks)

-unit of account (used to set the value of items, measure value of economy)

-store of value (used to save purchasing power)

Question 4

money made up of precious metals or another valuable commodity

Answer 4

commodity money

Question 5

paper currency was under which development?

Answer 5

fiat money

Question 6

an instruction from you to your bank to transfer money from your account to someone else’s account when she deposits the check.

Answer 6

CHECKS

Question 7

can be written for any amount up to the balance in the account, making transactions for large amounts much easier

Answer 7

CHECKS

Question 8

banks provide websites at which you just log on, make a few clicks, and thereby transmit your payment electronically.

Answer 8

ELECTRONIC PAYMENT

Question 9

money that exists only in electronic form

Answer 9

E-MONEY

Question 10

enable consumers to purchase goods and services by electronically transferring funds directly from their bank accounts to a merchant’s account.

Answer 10

DEBIT CARD

Question 11

purchased for a preset amount that the consumer pays up front, like a prepaid phone card.

Answer 11

STORED-VALUE CARD

Question 12

system of trading commonly practiced throughout the world and adopted by the Philippines.

Answer 12

BARTER

Question 13

first local form of coinage was called?

Answer 13

PILONCITOS

Question 14

earliest coins brought in by the galleons from Mexico and other Spanish colonies.

Answer 14

COBS or MACUQUINAS

Question 15

first crude copper or bronze coins locally produced in the Philippines.

Answer 15

barrilas (struck in the PH by order of the Spanish govt)

Question 16

was vested with the authority to produce currencies under the Malolos Consti of 1898?

Answer 16

GENERAL EMILIO AGUINALDO

Question 17

at the Malolos arsenal, two types of _______ (amount) copper coin were struck

Answer 17

two-centavo

Question 18

rate of change in the weighted average prices of goods and services typically purchased by consumers.

Answer 18

INFLATION

Question 19

average price of a standard basket of goods and services (hundreds of consumption items such as food products, clothing, water, and electricity) consumed by a typical Filipino family for a given period.

Answer 19

Consumer Price Index (CPI)

Question 20

rate of change in the weighted average prices of all goods and services in the CPI basket.

Answer 20

HEADLINE INFLATION

Question 21

an alternative measure of inflation that removes certain components of the CPI basket that are subject to volatile price movements such as rice, corn, fruits and vegetables, fuel items

Answer 21

CORE INFLATION

Question 22

pressures on inflation caused by relatively higher demand compared to the available supply of goods and services.

Answer 22

DEMAND-PULL FACTORS

Question 23

pressures on inflation resulting from shortages in supply and increases in the cost of production without a corresponding expansion in output.

Answer 23

SUPPLY SHOCKS

Question 24

price stability is where we have a ____ and stable inflation

Answer 24

LOW

Question 25

price stability effects on the economy

Answer 25

-supports economic growth (allows households to plan) -export firms, pricing of products competitively -promotes income equality (protect purchasing power of less privileged)

Question 26

BSP's role in relation to inflation

Answer 26

control inflation through its conduct of monetary policy instruments

Question 27

set of measures or actions implemented by the central bank to affect the supply of money and credit in the economy.

Answer 27

MOENTARY POLICY

Question 28

Monetary policy setting that intends to increase the level of liquidity/money supply in the economy and which could also result in a relatively higher inflation path for the economy.

Answer 28

EXPANSIONARY

Question 29

EXPANSIONARY tends to encourage economic activity as ______ (more or less) funds are made available for lending by banks. this, in turn, ______ (increases or decreases) aggregate demand which could eventually fuel inflation pressures in the domestic economy.

Answer 29

more; increases

Question 30

decrease the level of liquidity/money supply in the economy and which could also result in a relatively lower inflation path for the economy.

Answer 30

CONTRACTIONARY

Question 31

CONTRACTIONARY tends to limit economic activity as _____ (more or less) funds are made available for lending by banks. This, in turn, ________ (increases or decreases) aggregate demand which could eventually temper inflation pressures in the domestic economy.

Answer 31

less; decreases/lowers

Question 32

how does the BSP implement monetary policy?

Answer 32

-interest rate -reserve requirement -rediscounting -open market operations -special deposit accounts -moral suasion

Question 33

the policy interest rate at which the BSP borrows from banks with government securities as collateral.

Answer 33

Overnight Reverse Repurchase (RRP) Rate

Question 34

refers to the proportion of banks’ deposits and deposit substitute liabilities that banks are required to hold as reserves

Answer 34

reserve requirement

Question 35

special refinancing facility of central banks wherein a financial institution borrow money from the BSP using promissory notes and other loan papers of its borrowers as collateral.

Answer 35

rediscounting

Question 36

sale or purchase of government securities by the BSP to withdraw liquidity from or inject liquidity into the system

Answer 36

open market operations

Question 37

fixed-term deposits by banks and trust entities of BSP-supervised financial institutions with the BSP.

Answer 37

special deposit accounts

Question 38

influence which the central bank exercises to induce or convince banks to conduct operations in a manner that would contribute to the attainment of monetary goals but not necessarily support the profit-maximizing objectives of the banks.

Answer 38

moral suasion

Question 39

basic approach of moentary policy in the PH?

Answer 39

inflation targeting framework

Question 40

WHAT IS INFLATION TARGETING?

Answer 40

framework for monetary policy that focuses mainly on achieving price stability as the ultimate objective of monetary policy. It entails the announcement of an explicit inflation target set by the Government, which the BSP commits to achieve over a two-year horizon.

Question 41

level of inflation which the BSP aims to achieve over a given period under the inflation targeting framework.

Answer 41

INFLATION TARGET

Question 42

represents policymakers’ desired inflation rate, which they commit to achieve over the policy horizon.

Answer 42

INFLATION TARGET

Question 43

represents the expectation or prediction of the inflation rate over the policy horizon, given current and available information

Answer 43

INFLATION FORECAST

Question 44

Under inflation targeting, the central bank does what

Answer 44

compares actual headline inflation against inflation forecasts. It uses various monetary policy instruments at its disposal to achieve the inflation target.

Question 45

approach to monetary policy whereby the central bank adjusts its monetary policy instruments to control the level of monetary aggregates.

Answer 45

MONETARY AGGREGATE TARGETING

Question 46

process through which adjustments in the BSP’s stance, mainly through its policy rate, work their way through the economy by influencing the demand for goods and services, and ultimately inflation.

Answer 46

Monetary Policy Transmission Mechanism

Question 47

FEATURES OF INFLATION TARGETING?

Answer 47

-simple framework -greater focus on price stability -forward-looking -comprehensive approach -promotes transparency -increases accountability