QUIZ ABOUT MONETARY POLICY

ANS: MONETARY POLICY

•THE PROCESS BY WHICH THE MONETARY AUTHORITY OF A COUNTRY CONTROL THE SUPPLY OF MONEY, OFTEN TARGETING A RATE OF INTEREST FOR THE PURPOSE OF PROMOTING ECONOMIC GROWTH AND STABILITY

ANS: MONETARY THEORY

•PROVIDES INSIGHT INTO HOW TO CRAFT OPTIMAL MONETARY POLICY.

ANS: EXPANSIONARY POLICY

•TRADITIONALLY USED TO TRY TO COMBAT UNEMPLOYMENT IN A RECESSION BY LOWERING INTEREST RATES IN THE HOPE THAT EASY CREDIT WILL ENTICE BUSINESSES INTO EXPANDING.

ANS: CONTRACTIONARY POLICY

•INTENDED TO SLOW INFLATION IN ORDER TO AVOID THE RESULTING DISTORTIONS AND DETERIORATION OF ASSET VALUES

ANS: NET EXPORT

•THE VALUE OF A COUNTRY'S TOTAL EXPORTS MINUS THE VALUE OF ITS TOTAL IMPORTS.

ANS: TRADE DEFICIT

•REPRESENTS AN OUTFLOW OF DOMESTIC CURRENCY TO FOREIGN MARKETS.

ANS: TRADE SURPLUS

• REPRESENTS A NET INFLOW OF DOMESTIC CURRENCY FROM FOREIGN MARKETS, AND IS THE OPPOSITE OF A TRADE DEFICIT, WHICH WOULD REPRESENT A NET OUTFLOW. 

ANS: BUDGET DEFICIT

• MOST COMMONLY USED TO REFER TO GOVERNMENT SPENDING RATHER THAN BUSINESS OR INDIVIDUAL SPENDING.

ANS: REQUIRED, RESERVE, RATIO

• THE PORTION (EXPRESSED AS A PERCENT) OF DEPOSITORS' BALANCES BANKS MUST HAVE ON HAND AS CASH

ANS: BOND

• A DEBT INVESTMENT IN WHICH AN INVESTOR LOANS MONEY TO AN ENTITY (CORPORATE OR GOVERNMENTAL) THAT BORROWS THE FUNDS FOR A DEFINED PERIOD OF TIME AT A FIXED INTEREST RATE.