Question

True or False. Explain please

1.

A particular expansionary monetary policy action may result in both credit and quantitative easing occurring simultaneously. But, particular policies need not always do both at the same time.

2.

Increasing haircuts in the overnight repo market are analogous to withdrawals from the shadow banking system.

Answer 1

1. A particular expansionary monetary policy action may result in both credit and quantitative easing occurring simultaneously. But, particular policies need not always do both at the same time.

Ans: True. reason: expansionary monetary policy is a combination of different policies so both CE and QE possible in whole but in case one policy may not be possible to satisfy both.

2. Increasing haircuts in the overnight repo market are analogous to withdrawals from the shadow banking system.

Ans: False. Reason: An increase in haircut put the banks in deficit so all will run to shadow banking system.