Application: Monetary Policy For each of the monetary tool imposed by Bangko Sentral ng Pilipinas (BSP): 1. Determine whether it is an expansionary or a contractionary policy. 2. Determine the effect of the monetary tool on the money market, equilibrium interest rate and equilibrium quantity of money, and on the economy (i.e., effect only on production and spending). Example answer: expansionary policy: A; increase; decrease; decrease production and spending MS; MS, MS, MS2 MD MD QM QM 1.) The Bangko Sentral ng Pilipinas (BSP) lowers the reserve requirement ratio. ANSWER: 2.) The Bangko Sentral ng Pilipinas (BSP) applies its moral suasion ability| requesting commercial banks to lower down interest rates. ANSWER: 3.) The government decided to deposit funds at the Bangko Sentral ng Pilipinas (BSP). ANSWER:

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