Chapter 2

Question 1

It is under the control of BSP and is completely discretionary

Answer 1

Monetary Policy

Question 2

This is used by the government to be able to control inflation and stabilize currency

Answer 2

Monetary Policy

Question 3

Two ways that the government can influenece the economy

Answer 3

monetary policy
fiscal policy

Question 4

The BSP will lower interest rates and increase the money supply

Answer 4

recession

Question 5

The BSP will raise interest rates and decrease the monet supply

Answer 5

Overheated expansion

Question 6

commonly called as easy money

Answer 6

expansionary

Question 7

commonly called as tight money

Answer 7

contractionary

Question 8

a monetary policy setting that intends to increase the level of liquidity or money supply in the economy qnd which could result in a relatively higher inflation path for the economy

Answer 8

expansionary monetary policy

Question 9

tends to encourage economic activity as more funds are made available for lending by banks

Answer 9

enpansionary

Question 10

a monetary policy setting that intends to decrease the level of liquidity or money supply in the economy and which could also result in a relatively lower inflation lath for the economy

Answer 10

contractionary

Question 11

tends to limit economic activity as less funds are made available for lending by banks

Answer 11

contractionary monetary policy

Question 12

is focused mainly on achieving a low and stable inflation, supportive of the economys growth objective

Answer 12

inflation targeting

Question 13

to increase or reduce liquidity in the financial system, the BSP uses

Answer 13

open market operations
accepts fixed-term deposits
offers standing facilities
requires vanking institution too hold reserves

Question 14

are a key component of monetary policy implementation

Answer 14

open market operations

Question 15

open market operations consists of

Answer 15

repurchase transactions
reverse repurchase transactions
outright transactions
foreign exchange swaps

Question 16

the BSP buys government securities from a bank with a commitment to sell it back at a specified future date at a predetermined rate

Answer 16

repurchase or repo transaction

Question 17

the BSP acts as the seller of government securities and the banks payment has a contractionary effect on liquidity

Answer 17

reverse repo

Question 18

refer to the direct purchase or sale by the BSP of its holdings of government securities from or to banking institutions

Answer 18

outright transactions

Question 19

refer to transactions involving the actual exchange of two currencies on a specific date at a rate agreed on tge deal date

Answer 19

foreign exchange swaps

Question 20

consists of fixed-term deposits by banks and by trust entities of banks and non-bank financial institutions with the BSP

Answer 20

Special Deposit Accounts

Question 21

is a standing credit facility provided by the BSP t help banks meet temporary liquidity needs by refinancing the loans they extend to their clients

Answer 21

Rediscounting

Question 22

allows a financial institution to borrow money from the BSP using promissory notes and other loan papers of its borrowers as collateral

Answer 22

rediscounting facility

Question 23

two types of rediscounting facilities

Answer 23

the peso rediscounting facility
the exporters dollar and yen rediscount facility

Question 24

refer to the perventage of bank deposits and deposit substitute liabilities that banks must keep on hand or in deposits with the BSP and therefore may not lend

Answer 24

reserve requirements

Question 25

required reserves consist of two forms

Answer 25

regular or statutory reserves
liquidity reserves

Question 26

help to reduce bank intermediation costs since they are paid market based interest rates

Answer 26

liquidity reserves

Question 27

8 recent developments and inflation outlook

Answer 27

domestic price conditions
inflation expectations
inflation outlook
demand conditions
supply side indicators
financial market developments
domestic liquidity and credit conditions
fiscal developments
external developments

Question 28

the sum of the reserve money, reserve eligible government securities

Answer 28

base money

Question 29

represents the average price for a given period of a standard basket of goods and services consumed by a typical filipino family

Answer 29

consumer price index

Question 30

the rate of change in the weighted average prices of all goods and services in the cpi basket

Answer 30

headline inflation

Question 31

the rate of change in the weighted average prices of goods and services typically purchased by consumers

Answer 31

inflation rate

Question 32

an alternative measure of inflation that eliminates transitory effects on the cpi

Answer 32

core inflation

Question 33

refers to the option given to bqnks in complying with the reserve requirement

Answer 33

liquidity reserves

Question 34

the sale or purchase of government securities by the bsp to withdraw liquidity from or inject liquidity into the system

Answer 34

open market operations

Question 35

the sum of savings and time deposits

Answer 35

quasi money

Question 36

the policy interest rate at which the bsp lends to banks with government securities as collateral

Answer 36

repurchase rate

Question 37

is a deposit facility with the bsp designed to facilitate the adoption of the change in the banks mkde of compliance with the liquidity reserve requiremenr

Answer 37

reserve deposit accounts

Question 38

the sum of currency in circulation and reserves of banks which include cash in banks vault and reserve balances

Answer 38

reserve money

Question 39

refers to the proportion of banks deposits and deposit substitute liabilities that banks are required to hold as reserves

Answer 39

reserve requirement

Question 40

the policy interest rate at which the bsp borrows from banks with government securities as collateral

Answer 40

reverse repurchase