Order the following steps in the process of expansionary monetary policy:
1️⃣ Increase the money supply
2️⃣ Lower interest rates
3️⃣ Stimulate economic activity
Match the tool of monetary policy with its description:
Open Market Operations ↔️ Buying and selling government securities to influence money supply and interest rates
Reserve Requirements ↔️ The amount of cash banks must hold as reserves, affecting their lending capacity
Discount Rate ↔️ The interest rate charged by the central bank on loans to commercial banks
Open market operations involve buying and selling government securities to influence the money supply and interest rates.
True
Contractionary monetary policy reduces inflation by decreasing demand and raising interest rates.
True
What is the primary goal of contractionary monetary policy?
Reduce inflation
Expansionary monetary policy lowers interest rates to stimulate economic activity
Order the tools of monetary policy from most to least direct influence on the money supply:
1️⃣ Open Market Operations
2️⃣ Reserve Requirements
3️⃣ Discount Rate
Expansionary monetary policy boosts employment by increasing production
Monetary policy refers to actions taken by a central bank to influence the money supply and interest rates to achieve economic goals like price stability, full employment, and economic growth.Monetary
Contractionary monetary policy decreases the money supply and raises interest rates to slow down economic activity and control inflation.
True
Lowering the discount rate encourages borrowing and increases the money supply
Order the primary targets of monetary policy according to their importance:
1️⃣ Price stability
2️⃣ Full employment
3️⃣ Economic growth
Monetary policy has significant impacts on the economy
Central banks aim to balance the economy by targeting price stability, full employment, and economic growth.
True
What is the effect of contractionary monetary policy on economic activity?
Slows it down
Open market operations involve buying and selling government securities
What are the economic goals that monetary policy aims to achieve?
Price stability, full employment, economic growth
What dual mandate do central banks aim to achieve through monetary policy actions?
Price stability and full employment
What types of monetary policies can central banks implement to achieve their economic goals?
Expansionary and contractionary
Expansionary monetary policy stimulates economic growth by increasing the money supply and lowering interest rates
What is the primary goal of expansionary monetary policy?
Stimulate economic growth
Match the economic goal with its definition:
Price stability ↔️ Low and steady inflation
Full employment ↔️ Maximizing employment
Economic growth ↔️ Sustainable economic expansion
Monetary policy actions are used to achieve the dual mandate of price stability and full employment.
True
Central banks must balance multiple targets to ensure a healthy and stable economy.