The Objectives of the Central Bank excludes which of the following? O a. Financial System Stability O b. Low stable Inflation O c. Economic Stability O d. Low Unemployment Rate
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- Identify which of the following are common functions of the Central Bank: I. Supervising the Stock Market I. Lending to the Commercial Banking Sector II. Lending to the general public IV. Forming and implementing monetary policy a. I, Il and IV only O b. I and II only O C. All of the above O d. Il and IV onlyPlease no written by hand solution tle shifts the Central Bank rule to the right. O a. An increase in the Z factors O b. A decrease in the price level O c. An increase in government spending O d. A decrease in government spending13. When the government uses its overdraft facilities at the central bank, it ___________ the quantity of moneyin the economy. This is called ___________________ financing. A Increases; deflationaryB Decreases; inflationaryC Decreases; deflationaryD Increases; inflationary
- Price stability: Suppose you are the head of the central bank and your mandateis to maintain the price level at a constant value. Explain what you would doto the money supply in response to each of the following events:(a) Real GDP increases by 4% during a boom.(b) Real GDP declines by 1% during a recession.(c) Real GDP is growing at 3% per year.(d) Te velocity of money increases by 2%.(e) Te velocity of money declines by 1%.Suppose that a borrower and a lender agree on thenominal interest rate to be paid on a loan. Theninflation turns out to be higher than they bothexpected.a. Is the real interest rate on this loan higher or lowerthan expected?b. Does the lender gain or lose from thisunexpectedly high inflation? Does the borrowergain or lose?c. Inflation during the 1970s was much higher thanmost people had expected when the decade began.How did this unexpectedly high inflation affecthomeowners who obtained fixed-rate mortgagesduring the 1960s? How did it affect the banks thatlent the moneyThe _demand for money arises from the need to hold money as a medium of exchange. This demand for money is a function of Select one: a. transaction; interest rates O b. precautionary; national income O c. transaction; national income O d. speculative; interest rates
- Assuming an economy have only two commercial banks in it banking system, Classic Bank and Prudent Bank. The following shows the balance sheet of the two banks as at 2019.Classic BankBalance sheet as at December, 2019GHSm GHSmAssets: Liabilities & Equity:Reserves 1,000 Deposits 3,000Securities 2,000 Equity 7,000Loans & Advances 1,000Property, Plant and Equipment 6,000 .10,000 10,000 Prudent BankBalance sheet as at December, 2019GHSm GHSmAssets: Liabilities & Equity:Reserves 600 Deposits 2,500Securities 1,500 Equity 4,400Loans & Advances 800Property, Plant and Equipment 4,000 .6,900 6,900Assume a required reserve ratio of 10%.(a) What is the amount of excess reserves in this commercial banking system? (b)What is the maximum amount that the money supply can be expanded? What would be the effect of a fall in reserve ratio to 5%, on the maximum amount that the money supply can be expanded? (c) Determine the stock of broad money supply assuming the non-bank public holds…How can a central bank decrease the money supply? O a. By selling securities O b. All of the answers are correct O c. By decreasing the target overnight interest rate O d. By engaging in "quantitative easing"The central bank of the Dominican Republic decides to pursue acontractionary monetary policy. Provide a table with the money supply data and inflationrate for the Dominican Republic for 2014 - 2019.(c) Based on the data from the Dominican Republic, do you agree with thecentral bank’s decision to pursue a contractionary monetary policy? Explain why orwhy not. (d) Identify a newspaper article from the Dominican Republic that provides asituation in which a contractionary monetary policy was implemented by the centralbank. Ensure that you provide a screenshot of the article in your submission. Thescreenshot should include the name of the publication, date of publication and nameof the article.(i) Identify the contractionary monetary policy used in the article. (ii) Carefully explain, in as much detail as possible, how the chosen action from thearticle will impact the money market. (iii) Illustrate using the money market diagram, the overall impact of the chosen actionfrom the article on…
- Money demand is likely to increase the most during which part of the business cycle? A. recession B. trough Ос. рeak O D. contraction O E. recoverySuppose a researcher discovers that a measure of thetotal amount of debt in the U.S. economy over thepast 20 years was a better predictor of inflation andthe business cycle than M1 or M2. Does this discoverymean that we should define money as equal to the totalamount of debt in the economy?Describe the difference betweenan exogenous and an endogenous theory about the money supply.In your view what importantdifferences between the twotheories exist?