Question

3.The monetary policy instrument currently used by the Reserve Bank of Australia is:

(a) The growth rate of the money supply.

(b) Management of the exchange rate.

(c) A short-term interest rate.

(d) An inflation target.

(e) The rate of unemployment

4.A monetary policy target currently used by the Reserve Bank of Australia is:

(a) Consumer price inflation.

(b) A short-term interest rate.

(c) The growth rate of the money supply.

(d) The exchange rate.

(e) The level of potential GDP

5.Measures of core inflation:

(a) seek to remove some of the short-run or transitory changes in headline inflation.

(b) seek to measure the longer term trends in inflation.

(c) are generally more variable than headline inflation.

(d) both (a) and (b)

(e) are affected by one-time changes in the CPI due to variations in tax

8.In the Australian monetary system, exchange settlement accounts (ESAs) refer to:

(a) Accounts held by the Federal Government at the RBA and used to make payments.

(b) Accounts held by financial institutions at the RBA and used in clearing payments.

(c) Accounts held by the non-bank public at the RBA and used to make payments.

(d) Transactions accounts held by households with banks and other non-bank financial institutions

(e) Account held at financial institutions by the RBA and use to make payments.

9.In the Australian monetary system, open market operations refer to:

(a) The RBA buying and selling bonds to the non-bank public.

(b) The RBA buying bonds that are newly issued by the Federal Government.

(c) The RBA buying and selling bonds to the banking system.

(d) The RBA buying and selling bonds to the Federal Government.

(e) All of the above

20.Consider the following Taylor rule for the real interest rate.

r = 0.02 + 0.5 π + 0.5 [(y-y*)/y*]

If the inflation rate (expressed as a decimal) is 0.02, y = 100 and y* = 105.26, what is the approximate value of the real interest implied by the Taylor rule?

(a) 0.01

(b) 0.02

(c) 0.025

(d) 0.005

(e) 0.00

Answer 1

3. The monetary policy instrument currently used by the Reserve Bank of Australia is:
(c) a short term interest rate
Explanation - The RBA charges an interest rate known as the cash rate, which is the short term interest, to the commercial banks for overnight loans. It thus, in turn affects the market interest rate.

4. A monetary policy target currently used by the Reserve Bank of Australia is:
(a) Consumer price inflation
Explanation - The monetary policy target of the RBA is to keep the consumer price inflation within the desired target.

5.Measures of core inflation:
(b) seek to measure the longer term trends in inflation.
Explanation - Core inflation is the change in price of goods and services that are less volatile in nature and hence it works as an indicator for a long term inflation trends.

8.In the Australian monetary system, exchange settlement accounts (ESAs) refer to:
(b) Accounts held by financial institutions at the RBA and used in clearing payments.
Explanation - It is the settlement obligations used to clear the payments.