Monetary Policy Quiz

Which of the following statistics is least likely to cause the RBA Board to consider tightening monetary policy

• A higher Terms of Trade

• A higher number of business bankruptcies

• A lower value for the Australian dollar

• Higher levels of capacity utilisation in the economy

A monetary policy tightening is likely to be assisted by which of the following events:

• A fall in tax rates

• A fall in the value of the exchange rate

• A fall in unemployment

• A fall in the terms of trade

An increase in the cash rate is least likely to be in response to

• An appreciation of the AUD

• Higher levels of confidence in Australia

• Continued strong growth in China

• high rates of capacity utilisation reported by businesses

The RBA will not necessarily wait for inflation to fall before loosening monetary policy. This illustrates that monetary policy is used

• retrospectively

• effectively

• pre-emptively

• selectively

Which of the following indicators is unlikely to cause the RBA to consider loosening of monetary policy

• A lower level of job vacancies

• Declining consumer and investor confidence

• Strong growth in prices received for exports

• Slower global growth rates

A more restrictive or contractionary monetary policy stance is likely to

• Reduce the Current Account Deficit

• Reduce pressure on the value of the Australian dollar

• Increase the demand for labour and reduce unemployment

• Reduced Investment expenditure by businesses

Which of the following is a relative weaknesses of monetary policy

• inability of monetary policy to affect employment growth

• inability of monetary policy to influence the value of $A

• inability of monetary policy to influence price pressure in the economy

• inability of monetary policy to focus on particular industries

A key monetary policy strength is its

• ability to control interest rate levels in the economy

• ability to target particular sectors or industries in need of stimulus

• ability to have a relatively quick impact on the economy

• relative independence from the government of the day

In the event that the government implements income tax cuts to win favour with the electorate, the RBA is more likely to do which of the following?

• Loosen monetary policy by increasing the target cash rate

• Loosen monetary policy by decreasing the target cash rate

• Tighten monetary policy by increasing the target cash rate

• Tighten monetary policy by decreasing the target cash rate

Which of the following is not a strength of monetary policy

• The RBA's independence

• Its short implementation lag

• Its short impact lag

• Its ability to achieve all objectives simultaneously in the long run