Question

32. Monetary policy refers to:
A)   decisions to determine the government's budget.
B)   policy directed toward increasing exports and reducing imports.
C)   government policies aimed at changing the underlying structure or institutions of the economy.
D)   the determination of the nation's money supply.

33)   Fiscal policy refers to:

A)   government policies aimed at changing the underlying structure or institutions of the economy.
B)   decisions to determine the government's budget.
C)   the determination of the nation's money supply.
D)   policy directed toward increasing exports and reducing imports.

34. In a debate on the state of the economy Senator X pointed out that the unemployment rates for teenagers, blacks, and hispanics had increased over the last year, while Senator Y stated that the unemployment rate in the United States was at its lowest level in more than 30 years. In this example, aggregate data is being used by:

A) senator Y B) neither senators C) both senators D) senator X

Answer 1

Monetary Policy : Monetary Policy is defined as the measures taken by the monetary authority to control supply of money is called monetary policy. Monetary policy aims at controlling money supply and thereby regulating the availability and cost of credit. The main objectives of monetary policy is to achieve price stability, reduction of unemployment and economic growth. Monetary policy is issued to achieve sustainable growth in the economy.

(32) Monetary policy refers to:

(a) Decision to determine government budget ( Incorrect ) : Decisions to determine the government budget is the Fiscal Policy of the Central Bank and it has nothing to do with the Monetary Policy. This is the incorrect option as it is a Fiscal Policy and not a definition of monetary policy.

(b) Policy directed toward increasing exports and reducing imports ( Incorrect ) : Policy directed toward increasing exports and reducing imports is known as the the trade policy of the nation. It is the incorrect option as it is not the definition of monetary policy.

(c) Government policies aimed at changing the underlying structure or institutions of the economy ( Incorrect ) : Government policies aimed at changing the structure and institutions is conserned withh the structural policy and it has nothing to do with the monetary policy. This is the incorrect option as it is a structura policy and not a monetary policy.

(d) Determination of nations money supply ( Correct ) : The nations money suppy is determined with the use of monetary policy. Monetary policy aims at the controlling money supply in the economy during periods of inflations or deflations. This is the correct option as this is the correct definition for monetary policy among all other options.

Hence, OPTION (d) Detrmination of money supply is the correct option.

(33) Fiscal Policy refers to:

(a) Government policies aimed at changing the underlying structure or institutions of the economy ( Incorrect ) : Government policies aimed at changing the structure and institutions is conserned withh the structural policy and it has nothing to do with the fiscal policy. This is the incorrect option as it is a structural policy and not a fiscal policy.

(b) Decisions to determine the government's budget ( Correct ) : Decisions to determine the government budeget is known as the Fiscal Policy. Fiscal policy aims at controlling the economy during times of inflation and deflation. This is a policy controlled by the central bank of the nation. This is the correct option as it best defines the definition for fiscal policy among all other options.

(c) Determination of nations money supply ( Incorrect ) : The nations money supply is determined with the use of monetary policy. This is the incorrect option as it has nothing to do with the fiscal policy.

(d) Policy directed toward increasing exports and reducing imports ( Incorrect ) : Policy directed toward increasing exports and reducing imports is known as the the trade policy of the nation. It is the incorrect option as it is not the definition of fiscal policy.