Tutorial on - Monetary policy and Inflation

Practice Questions

You are expected to submit the completed tutorial at the end of the 7th week.

21st August 2015

‘Price stability is one of the important elements for investor and consumer

confidence in an economy’.

a. There are many causes for inflation. Explain any 5 (FIVE) causes.

(5 Marks)

b. Define and explain the terms ‘Headline inflation’ and ‘Core inflation’. (5 Marks)

c. Explain why core inflation is more important than headline inflation for economic decision making (5 Marks)

d. Maintaining price stability is one of the prime macroeconomic

objectives of any government monetary policy” Evaluate the

effectiveness of any 4 (FOUR) measures the government can take to

manage the price stability of an economy? You may use examples from

Sri Lanka

(15Marks)

Total 30 Marks

You may spend 3 hours to complete this task.

World limit :1200 words (maximum)

Reference material:

1. Slomans John, Alison Wride 7ed. (2009), Economics. Chapter 15Pages 416 – 435

2. Price Stability – Pamphlet series no 1. Central Bank of Sri Lnaka3. Daily FT newspaper recent articles on this topic