Question

In November, 2019, the IMF announced that it believed Guyana could see economic growth of 86% in 2020 (this was before the current crisis), driven by its new discovery of oil and creation of an oil export sector.  The Bank of Guyana therefore expected the overall price level to _____.

However, one of the Bank of Guyana's stated policy objectives is stable prices. As a result, it was anticipating conducting _____ monetary policy.

fall; contractionary

fall; expansionary

rise; expansionary

rise; contractionary

Answer 1

The Bank of Guyana therefore expected the overall price level to Rise.

Reason: Expectation about higher economic growth will lead investment and demand in the current situation and therefore will cause price level to rise.

However, one of the Bank of Guyana's stated policy objectives is stable prices. As a result, it was anticipating conducting expansionary monetary policy.

Reason: If Bank of Guyana's policy stated stable price, then to boost economy they will plan to increase money supply with expansionary policies.