Concepts Check Stabilization Macroeconomic Series Quiz

1. The three critical function (monetary tools) of a central bank under lender of last resort are the following- Lending and Borrowing in the open market for Repo or Reverse Repo; Purchase of Assets or Quantitative Easing in the Open Market to expand reserves of central bank; Distress lending to financial institutions when there is a systemic risk within the system.

2. Which of the following variables do central banks use as a mode of price stability to monitor monetary stability within the system?

The Philips Curve signifies a negative relationship between ____________________ and _______________?

In the long run, the unemployment rate is at the natural rate of unemployment?

Under open market operations, the central bank buys bonds to _____________ liquidity within the economy and ____________  interest rates within the economy.

Investors look at nominal rate of interest (interests paid by bonds for simplicity) or real return (real purchasing power) of assets while investing keeping other factors constant?

In Theory of Liquidity Preference,  the real money balances supply (M/P)  is ___________. The  money (M) is supplied by ______________.

Quantitative Easing / Asset Purchases ________________ the aggregate supply of reserves (money supply) within the system.

A country has near zero interest rates with low to moderate inflation (consider moderate inflation about 2%), and very low to negative economic growth. If the country now starts quantitative easing and starts buying both medium- and long-term sovereign bonds, what is the country trying to achieve ______ and ______? Is this an example of liquidity trap?

What does it mean when we say the Phillips Curve is flattening ?