Republic of the Philippines

North Eastern Mindanao State University

Final Examination in FM 4 (Monetary Policy and Central Banking)

1 Semester AY 2024-2025
st

Name: ORBETA, CHRISTINE PEARL T.

Year&Section: BSBA FM 3A
Instructor: LOUIE JAY A. GALAN
Date: 12-13-24

GENERAL INSTRUCTION:
Read each item carefully and follow the instructions before answering. You shall manage to answer the test
questionnaire in 1 hour and 30 minutes ONLY

TEST I. MULTIPLE CHOICES

Instruction: Write the letter of the correct answer.

1. What is the primary role of a central bank? 6. Which of the following is NOT a responsibility
of a central bank?
a) Printing currency for daily use
b) Regulating the supply of money and maintaining a) Issuing the national currency
financial stability b) Regulating and supervising commercial banks
c) Issuing loans to individuals c) Managing government tax collection
d) Managing international trade d) Setting monetary policy

2. What is the purpose of a central bank's reserve

requirement? 7. What is the primary objective of monetary
policy in most countries?
a) To encourage banks to lend more money
b) To limit inflation through reduced spending a) Reducing government debt
c) To ensure banks maintain a minimum amount of b) Maintaining price stability and controlling
reserves to meet withdrawals inflation
d) To regulate foreign exchange rates c) Maximizing exports over imports
d) Ensuring stable foreign exchange rates
3. Which of the following describes inflation
targeting by central banks?
8. Central banks often use interest rates as a tool
a) Setting a fixed exchange rate for the currency to control inflation. What happens when interest
b) Maintaining a specific range for inflation over time rates are increased?
c) Reducing the money supply to zero
d) Pegging the currency to a commodity a) Consumer spending rises
b) Borrowing becomes cheaper
4. Central banks often act as a "lender of last c) Economic growth slows
resort." What does this mean? d) Currency value decreases

a) They provide loans to consumers at the lowest 9. What is a central bank's role in promoting
rates economic growth?
b) They assist struggling banks to prevent financial
system collapse a) Directly investing in private businesses
c) They regulate the stock market during economic b) Implementing policies to ensure stable inflation
crises and a sound financial system
d) They fund large-scale government infrastructure c) Determining tax rates for individuals and
projects corporations
d) Increasing wages for government employees
5. What is the term for a central bank increasing
the money supply to stimulate the economy? 10. What is the role of the central bank in
currency stabilization?
a) Quantitative easing a) Increasing foreign trade quotas
b) Open market operations b) Intervening in the foreign exchange market to
c) Sterilization manage currency value
d) Contractionary policy c) Controlling all imports and exports
d) Funding government subsidies for exporters

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+63 999 663 4946
www.nemsu.edu.ph
 Republic of the Philippines
North Eastern Mindanao State University

11. What is the primary function of a central 18. Central banks promote economic growth by:
banking authority?
a) Directly investing in private businesses
a) Collecting taxes b) Implementing policies that ensure price stability
b) Issuing currency and regulating monetary policy and financial system soundness
c) Managing private investments c) Setting trade quotas
d) Regulating international trade d) Controlling government fiscal policies

12. What is the primary objective of a central 19. What is a central bank’s role in foreign
bank's monetary policy? exchange markets?

a) Maximizing exports a) Setting global trade policies

b) Controlling inflation and ensuring price stability b) Ensuring equal distribution of foreign reserves
c) Increasing national income among banks
d) Managing international aid programs c) Intervening to stabilize or influence currency
values
13. Central banks use open market operations to: d) Eliminating foreign exchange risks entirely

a) Influence exchange rates 20. What is the key difference between monetary
b) Manage the liquidity in the banking system and fiscal policy?
c) Control government budgets
d) Regulate the stock market a) Monetary policy is controlled by the government,
while fiscal policy is controlled by the central
14. Which of the following tools is used by a bank.
central bank to control inflation? b) Monetary policy involves controlling the money
supply, while fiscal policy involves government
spending and taxation.
a) Decreasing taxes c) Fiscal policy manages interest rates, while
b) Increasing government spending monetary policy focuses on tax collection.
c) Adjusting interest rates d) There is no difference; both refer to central bank
d) Introducing new fiscal policies actions.

15. What does "lender of last resort" mean in the 21. Central banks use the discount rate to:
context of a central bank?
a) Provide short-term loans to commercial banks
a) Providing loans to small businesses during crises b) Regulate consumer savings rates
b) Offering emergency funding to financial c) Determine exchange rate policies
institutions in distress d) Increase government borrowing capacity
c) Funding government deficit programs
d) Controlling private investments during
inflationary period. 22. The role of the central bank in financial
stability includes:
16. Which of the following is NOT a responsibility
of a central banking authority? a) Managing only the currency supply
b) Supervising financial institutions to prevent
systemic risks
a) Supervising commercial banks c) Collecting taxes from financial institutions
b) Managing foreign exchange reserves d) Limiting private sector growth
c) Issuing the national currency
d) Setting trade tariffs
23. A contractionary monetary policy is primarily
designed to:
17. A central bank reduces the money supply by:
a) Increase consumer spending
a) Lowering interest rates b) Reduce inflation by decreasing the money supply
b) Selling government securities c) Encourage foreign investment
c) Printing more currency d) Expand the national budget
d) Reducing taxes

Poblacion, Lianga, Surigao del Sur 8307

+63 999 663 4946
www.nemsu.edu.ph
 Republic of the Philippines
North Eastern Mindanao State University

31. Which of the following is a primary function of

24. What is the purpose of stress testing in the Bangko Sentral ng Pilipinas (BSP)?
financial institutions? a) Supervision of private corporations
b) Issuance of currency
a) Assessing the institution's capacity to handle c) Management of public utilities
financial shocks d) Regulation of trade tariffs
b) Enhancing employee productivity
c) Optimizing profit margins 32. The BSP is responsible for conducting
d) Managing customer complaints monetary policy to achieve which of the following
goals?
25. Which organization is tasked with regulating
cooperatives in the Philippines? a) Employment generation
b) Price stability
c) Trade liberalization
a) Cooperative Development Authority (CDA)
b) Bangko Sentral ng Pilipinas (BSP)
d) Poverty reduction
c) Securities and Exchange Commission (SEC) 33. What is the name of the official currency
d) Department of Finance (DOF) issued by the BSP?
26. What is the primary function of Bangko a) Peso
Sentral ng Pilipinas (BSP)? b) Dollar
a) ) Regulating and supervising the Philippine c) Yen
financial system d) Euro
b) Managing government infrastructure projects 34. Which BSP function is associated with
c) Collecting taxes for the government managing the country’s foreign reserves?
d) Setting foreign trade policy
a) Issuance of loans
27. The Bangko Sentral ng Pilipinas (BSP) was b) Monetary policy implementation
established in: c) Exchange rate management
d) Credit evaluation
a) 1935 35. Which of the following is NOT a responsibility
b) 1949 of the BSP?
c) 1973
d) 1993 a) Printing money
b) Supervising banks
28. Which of the following is NOT a function of c) Managing fiscal policy
BSP? d) Promoting financial inclusion
36. What does the BSP use to control inflation in
a) Issuing the Philippine currency the economy?
b) Implementing monetary policy
c) Managing fiscal policy a) Tariff adjustments
d) Supervising financial institution b) Monetary tools like open market operations
c) Subsidy programs
29. What is the main objective of BSP’s monetary d) Tax reforms
policy?
37. The BSP sets the benchmark interest rates in
the economy to influence what?
a) Maximizing government revenue
b) Promoting price stability a) Consumer protection laws
c) Reducing government debt b) Public infrastructure development
d) Controlling foreign trade c) Borrowing and lending rates
d) Import and export tariffs
30. What is the role of BSP in foreign exchange
38. What is the highest decision-making body in
management?
the BSP?
a) Setting global exchange rates a) Monetary Board
b) Monitoring and managing the Philippine peso’s b) Executive Board
stability against other currencies c) Central Bank Council
c) Controlling all foreign investments in the d) Financial Stability Committee
Philippines
d) Eliminating foreign exchange risks

Poblacion, Lianga, Surigao del Sur 8307

+63 999 663 4946
www.nemsu.edu.ph
 Republic of the Philippines
North Eastern Mindanao State University

39. The BSP supervises banks to ensure which of 45. The BSP requires banks to maintain a reserve
the following? requirement. What is the purpose of this
regulation?
a) Profitability
b) Compliance with regulations A. To prevent bank failures due to liquidity shortages
c) Tax contributions B. To encourage higher lending rates
d) Employee welfare C. To ensure compliance with tax laws
D. To control foreign exchange
40. How does the BSP contribute to financial rates
literacy in the Philippines?
46. What type of risk does the BSP monitor in
a) Providing loans financial institutions to ensure stability?
b) Hosting financial education programs
c) Offering insurance products a) Market risk
d) Approving investment portfolios b) Credit risk
c) Operational risk
41. What type of policy does the BSP use to d) All of the above
control inflation and stabilize prices?
47. What is the main objective of anti-money
a) Monetary policy laundering regulations?
b) Fiscal policy
c) Trade policy a) To promote foreign investments
d) Industrial policy b) To prevent the illegal use of financial systems
c) To reduce interest rates
42. Which of the following is a key role of the BSP d) To facilitate trade agreements
in relation to the financial system?
48. What role does the Philippine Deposit
a) Profit generation Insurance Corporation (PDIC) play in financial
b) Ensuring financial stability supervision?
c) Providing subsidies
d) Setting tax policies a) Conducts monetary policy
b) Regulates foreign exchange
43. Which of the following institutions is primarily c) Protects depositors in case of bank failures
responsible for supervising banks in the d) Monitors bank profitability
Philippines?
49. What is a key feature of the Consumer
a) Department of Finance (DOF) Protection Framework in financial supervision?
b) Bangko Sentral ng Pilipinas (BSP)
c) Securities and Exchange Commission (SEC) a) Establishment of lower interest rates
d) Philippine Deposit Insurance Corporation (PDIC) b) Safeguarding clients against unfair practices
c) Monitoring of corporate profits
44. Which of the following is an example of a non- d) Providing tax incentives
bank financial institution?
50. Financial institutions are required to submit
a) Commercial bank regular reports to regulators. What is the primary
b) Savings and loan association reason for this?
c) Insurance company
d) Central bank a) To ensure data transparency and regulatory
compliance
b) To attract foreign investors
c) To monitor employee performance
d) To secure international funding

Poblacion, Lianga, Surigao del Sur 8307

+63 999 663 4946
www.nemsu.edu.ph