ECONOMICS
MONETARY POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
An open-market purchase of government bonds by the country’s central bank
|
|
|
A decrease in the required reserve ratio for the country’s commercial banks
|
|
|
An outflow of financial capital to other countries
|
|
|
A decrease in the country’s government spending
|
|
|
A decrease in inflationary expectations in the country
|
Detailed explanation-1: -FDI net outflows are the value of outward direct investment made by the residents of the reporting economy to external economies, including reinvested earnings and intra-company loans, net of receipts from the repatriation of capital and repayment of loans.
Detailed explanation-2: -The three traditional tools of monetary policy Buying bonds injects money into the money market, increasing the money supply. When the central bank wants interest rates to be higher, it sells off bonds, pulling money out of the money market and decreasing the money supply.
Detailed explanation-3: -Capital Outflow and Exchange Rates For example, China sells yuan to acquire U.S. dollars. The resultant increase in the supply of yuan decreases the value of that currency, decreasing the cost of exports and increasing the cost of imports.
Detailed explanation-4: -Capital inflows are defined as net purchases (difference between purchases and sales) of domestic assets by non-residents. Capital outflows equal net purchases of foreign assets by domestic agents excluding the central bank.