Question 1

What are the tools by the use of which the Reserve Bank can conduct an expansionary monetary policy? Briefly explain your answer (with an appropriate reference wherever used).

(6 marks)

Question 2

In the aftermath of the Global Financial Crisis, Don Brash (DB), a former governor of the Reserve Bank of New Zealand, suggested that they should only print money if the government simultaneously cut spending. Explain the likely impact of this policy suggestion and comment on the view on the state of the economy (i.e. whether he assumes NZ economy is at or below full employment).