Question

MATCHING

Match the terms on the right to the ones on the left by placing the appropriate CAPITAL letter on the space provided. All the phrases are designed to fit; some may fit more than once. In any case, provide only one answer for each term. Illegible answers will be marked as wrong.

1. _____ easy money policy                                    A.           increases competition
2. _____   M2+                                                            B.           imports become cheaper
3. _____ C $ depreciates                                         C.           expansionary fiscal policy
4. _____ reduction in Gov. spending                     D.           reduces competition
5. _____ non-tariff barrier                                      E.            used to reduce inflationary pressures
6. _____ C $ appreciates                                         F.            includes notice deposits of banks
7. _____ free trade                                                   G.           tight fiscal policy
8. _____ tax reduction                                             H.           Exports become cheaper
9. _____   M 1                                                             I.             interest rates fall
10. ____ tight money policy                                      J.            currency plus demand deposits in banks

Answer 1

1) easy money policy ----- I ............easy money policy means increasing money supply in the economy by reducing interest rates.

2)M2+ ----- F ........... because it includes notice deposits of banks.

3) C $ depreciates ----- H............ because,when a currency depreciates,it makes countries exports cheaper due to competitive advantage.

4) reduction in Govt spendings ----- G ....... because, when a country adopts contractionary or tight fiscal policy, government usually reduces spendings and increases taxes.

5)non tariff barriers ---- D ......... because imposing tariffs disproportionately will reduce competition.

6)C $ appreciates ----- B.......when a currency appreciates, it makes exports costlier and imports cheaper.

7) free trade ----- A....... because,free trade will promote growth and competition.

8)tax deductions ----- C....... because, when a country adopts expansionary fiscal policy, government reduces taxes and increases spendings.

9)M1 ------ J...... because, M1 = coins and notes in circulation + travelers checks + demand deposits.

10) Tight money policy ----- E....... because,when there is an inflationary pressure on economy, central banks often adopts contractionary monetary policy by increasing interest rates to reduce money supply which inturn reduces inflation.