week 10 - 12

Question 1

Inflation is measured using the

Answer 1

Consumer Price Index (CPI).

Question 2

It reflects the annual percentage change in the cost of a basket of goods and services.

Answer 2

Consumer Price Index (CPI).

Question 3

occurs when interest rates are low and savings rates are high, rendering monetary policy ineffective.

Answer 3

liquidity trap

Question 4

when a government spends more than it earns in revenue.

Answer 4

Budget Deficit

Question 5

are loans borrowed from foreign lenders.

Answer 5

External Debts

Question 6

occurs when government borrowing influences central bank decisions.

Answer 6

Fiscal Dominance

Question 7

operations involve the buying and selling of government securities in the open market by the central bank.

Answer 7

Open Market Operations

Question 8

refer to the minimum amount of reserves that banks must hold against their deposits.

Answer 8

Reserve Requirements

Question 9

allows banks to borrow funds from the central bank by rediscounting their loans and advances

Answer 9

Rediscounting Policy

Question 10

involves the central bank persuading banks to act in a certain way through communication and guidance rather than formal regulations.

Answer 10

Moral Suasion

Question 11

refers to limits imposed by the central bank on the amount of certain types of assets that banks can hold. This helps prevent excessive risk-taking and asset bubbles.

Answer 11

Portfolio Ceiling/Flooring

Question 12

refers to the stability of the value of money in the economy. It is achieved by controlling inflation and ensuring a stable financial system.

Answer 12

Monetary Stability

Question 13

refers to maintaining a low and stable inflation rate. It ensures that the purchasing power of money remains relatively constant over time.

Answer 13

Price Stability

Question 14

refers to maintaining a stable exchange rate between the domestic currency and foreign currencies. It helps in reducing uncertainty in international trade and investment.

Answer 14

Exchange Rate Stability

Question 15

refers to a situation where a large proportion of the labor force is employed. It is an indicator of a healthy economy.

Answer 15

High Employment Rate

Question 16

refers to the increase in the production of goods and services in an economy over time. It is measured by the growth rate of the Gross Domestic Product (GDP).

Answer 16

Economic Growth