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- 21 The main objective of monetary policy is …….* A. Growth with stability B. Reduce poverty and achieve stability C. Overall monetary stability D. None of these18 The following are the monetary policy tools EXCEPT:* A. buying and selling of short-term sukuk B. change the interest rates C. change the reserve requirements D. change in government spending and tax ratesQ16 Inflation brings downward changes in the purchasing power of monetary unit and the prices do not continuously rise in it. a. The above mentioned fact is true about inflation b. The above mentioned fact is about motivation. c. All options are correct d. The above mentioned fact is false about inflation
- All other things being equal, which of the following would cause interest rates to rise? a. The economy slides into a recession. b. The federal government's budget deficit declines. c. The rate of inflation decreases. d. The Federal Reserve contracts the money supply.QUESTION 15 When considering long-term foreign exchange fluctuations which of the following cause- effect relationships is true? options A. As inflation decreases, the real interest rate decreases and the currency weakens. B. When unemployment decreases, the local economy is stronger and the currency strengthens. C.Greater liquidity and smaller spreads lead to stronger local currency. D.Interest rate increases indicate weaker monetary policies which make a country less attractive to foreign investors and result in weaker local currencies. QUESTION 15(B) The inside market at a pure order driven exchange is 40 bid, 40.5 asked for ABC. Brokers then submit a limit buy order at 40.125, and a limit sell order at 40.425. If you then submit a small buy market order, at what price will your order be filled? options A.40 B. 40.625 C. 40.5 D.40.425 E. 40.125Question 42 When the Fed purchases government securities, it Question 42 options: a) automatically raises the discount rate b) automatically raises the legal reserve requirment c) decreases banks’s reserves and makes possible a decrease in the money supply d) increases banks’ reserves and makes possible an increase in the money supply
- 8) A market decline of 23% on a day when there is no significant macroeconomic event ______ consistent with the EMH because ________. A) would be; it was a clear response to macroeconomic news B) would not be; it was not a clear response to macroeconomic news C) would not be; it was a clear response to macroeconomic news D) would be; it was not a clear response to macroeconomic news Please justify your answer.8. Macroeconomic factors that influence interest rate levels Apart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity—influence interest rates. Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false: Statements True False The larger the federal deficit, other things held constant, the higher are interest rates. When the economy is weakening, the Fed is likely to increase short-term interest rates. During recessions, short-term interest rates decline more sharply than long-term interest rates. The Federal Reserve’s ability to use monetary policy to control economic activity in the United States is limited because US interest rates are highly dependent on interest rates in other parts of the world.82. âIt took Paul Volker, who became Fed chairman in 1979, to put the monetarist theory into practice, adopting money-supply targets that drove interest rates to double-digit levels, sent the economy into a deep recession, and ultimately brought inflation down.â What is this monetarist theory?inflation is always and everywhere a monetary phenomenonthe main determinant of the inflation rate is the rate of growth of the money supplyinflation can be controlled by controlling money growthall of the above1. “Earlier in the week the central bank’s traders intervened aggressively in the money market to push the yield on last week’s Treasury bills sharply higher.”What kind of intervention is being referred to? The central banka) sold bills b) bought billsc) announced an easier monetary policy d) raised the legal reserve requirement2. “Several government bond issues will raise $400 million, with the central bank picking up at least…
- QUESTION 7 First National Bank has assets that are more rate-sensitive than its liabilities. As interest rates rise, then we should expect the bank profits to: A. Remain unchanged B. Fall C. RiseQUESTION 4(a) Explain why the demand for loanable funds tends to increase during expansion.(b) Illustrate any FIVE (5) negative effects of inflation.A1 5a 5. Using appropriate models or theories, explain the economic intuition (logic) behind the following events. a. A decrease in money supply leads to a rise in short-run interest rate.