MONETARY POLICY
1) What is monetary policy? how much money circulates in the economy, and what that money is worth
2) Primarily what is the banks approach to monetary policy? Inflation control system
3) How is monetary policy carried out? bank influences short term interest rates by raising and
lowering target for the overnight rate
4)How does monetary policy affect the economy 3 reasons financial markets through the exchange
rate and interest rates, spending production and employment through cost of credit, the rate of inflation
5) Name a benefit to monetary policy-low stable and predictable inflation is the best contribution to a
well functioning economy
6) What is a safe level of inflation 2 per cent
7) Name an indicator that gives information about changes in the economy M1
8) What is the formula for GDP? GDP= P X Q
1) What are the effects of an increase in the money supply? An increase in the money supply causes
the rate of interest to fall. The fall in the rate of interest increases investments, which, in turn, increases
net domestic income.
2) What are the effects of a decrease in money supply? A decrease in the money supply causes the
rate of interest to rise. The increase in the rate of interest reduces investment which, in turn, reduces net
domestic income.
3) What are the effects of changes in income on the demand for money? An increase in income
causes the demand curve for money to shift to the right; a decrease causes the curve to shift to the left.
4) What does the speculative demand for money depend on? it depends on the rate of interest.
UNEMPLOYMENT
How do you calculate Unemployment Rate?
UF = (U / LABOUR FORCE) X 100
What are the four types of Unemployment?
Frictional, Cyclical, Structural and Seasonal Unemployment
What is Technological Unemployment?
Structural unemployment caused by introduction of labour-saving equipment or
methods
How do you calculate the Labor Force?
PARTICIPATION RATE = (LABOUR FORCE / POPULATION) X 100
What are the two Theories of Unemployment?
Classical Theory and Keynesian Theory
What does Non-Economic Costs include?
Emotional and psychological problems faced by the unemployed and their families
What is Okun’s Law?
The relationship between an economy’s GDP and the actual unemployment rate
How is Economic Costs measured?
Measured as a loss in total output or as a loss in total income
Which age group is most likely to be Unemployed?
15 – 24
Who falls under the category of the Unemployment Rate?
If people are without a job but are still actively looking and available for work