2012年金融英語證書考試FECT模擬試題及答案-3

2012年金融英語證書考試FECT模擬試題及答案-3模擬試題SECTIONONE(Compulsory)：Answeralltenquestionsinthissection.Eachquestioncarries1mark.1.Multiple-choicequestions:fromthefollowingfouroptions,selectacorrectandfillinitslabelingthebrackets.(Atotalof10points)1.Aproductionfunctionforafirmdescribes:()A.Whatshouldbeproducedtomaximizeprofit.B.Whatistechnologicallyfeasiblewhenthefirmproducesefficiently.C.Whatrevenueisearnedfromproducingefficiently.D.Whatthefirmproduceswithgiveninputs.2.Whichofthefollowingisnotacharacteristicofacompetitiveindustry?()A.Therearemanyfirms.B.Allfirmsproducehomogeneousproducts,whicharesubstitutableforeachother.C.Thereisafiercepricewaramongrivals.D.Firmscanenterandexittheindustryfreely.3.TheCentralBankintheopenmarketbuyingandsellingofsecuritiesisdesignedto:()A.regulationbondpricesB.achieveprofitmaximizationC.regulatemoneysupplyD.adjustpriceslevel4.Whatunemploymentisformedbecauseoftheeconomicrecession?()A.frictionunemploymentB.structuralunemploymentC.cyclicalunemploymentD.naturalunemployment5.Afteralongraceonahotday,arunnerenjoysherfirstdrinkalot,thesecondsheenjoyslessandshedeclinesathirddrink.Thisillustratestheprincipleof:()A.Increasingmarginalutility.B.Decreasingmarginalutility.C.Increasingmarginalcost.D.Decreasingmarginalcost.6.Onahotday,thepriceandthequantitysoldoficecreamsbothincrease.Thiscanreflecta:()A.Shiftinthedemandcurvetotheright.B.Movealongthedemandcurve.C.Shiftinthedemandcurvetotheleft.D.Shiftinthesupplycurvetotheright.7.Whenacountry’scurrencyappreciates,thecountry’sgoodsabroadbecome______andforeigngoodsinthatcountrybecome______.A.cheaper...moreexpensiveB.moreexpensive...cheaperC.cheaper...cheaperD.moreexpensive...moreexpensive8.AUScompanyisbiddingforacontractinChina.ItsChinesecustomerasksforaperformancebond.Whatisthemostlikelycourseofaction?()A.ItasksitsbanktoissueatenderbondwhichcanbeconvertedintoaperformancebondB.ItgivesupitsbidC.ItconsultsitsbankaboutissuingastandbyletterofcreditD.Itasksitsbanktoissueaperformancebond9.Thereisadeficitinthefederalbudgetwhen:()A.Federalgovernmentspendingisgreaterthanfederaltaxrevenues.B.U.S.importsaregreaterthanU.S.exports.C.Thetotaldemandformoneyisgreaterthanthetotalsupplyofmoney.D.U.S.importsaresmallerthanU.S.exports.10.Mrs.Jonespurchaseda20-yearTreasurybondbearinga12%couponrate.Shepurchasedthebondatpar($1000).Ifratesfallto9%whatwillbethenewpriceofthebond?()A.$1333B.$1500C.$750D.$900E.Therewillbenochangeinthepriceofthebond.SECTIONTWO(Compulsory)：Answerthequestionsinthissection.ReadingComprehension:(10points)JamesSigmund,CFA,istheHeadofInternationalEquityforPellGlobalAdvisors(PGA).SigmundisconsideringinvestinginthecountryofZuflakaspartofanemergingmarketportfolio.Sigmundisawareoftherisksininvestinginemergingmarketsandispreparingavaluationreportregardingthisinvestment.HeestimatesthatZuflakgovernmentdebtwouldberatedBB,andhasgatheredthefollowingmarketinformationforuseinanalyzingZuflak.LocalGovernmentBondYield=11.50%U.S.10yearTreasuryBondYield=4.50%U.S.BBratedCorporateBondYield=7.75%LocalInflationRate=6.50%U.S.InflationRate=3.00%ToassistinhisanalysisofZuflak,SigmundhasaskedStefanoTestorf,CFA,toestimateavalueforKianiCorporation(Kiani),OlegIndustries(Oleg),andMalikIncorporated(Malik)-thethreeprimarycompaniesdomiciledinZuflakthatSigmundhasdeterminedtohaveadequateliquidityforinclusioninPGA’sclientportfolios.TestorfgivesSigmundaroughdraftofhisreportandtellsSigmundthatinordertoaccountforcountryspecificemergingmarketrisks;heusedaprobability-weightedscenarioanalysistoadjustcashflows.Sigmundaskshim,“Whydidn’tyousimplyadjustthediscountrate?”Testorfreplieswiththreereasons:Reason1:ThecountryriskattributabletoZuflakcanbediversifiedawayaccordingtomodernfinancetheory,andshouldnotbeincludedinthecostofcapital.Reason2:Companiesinemergingmarketstendtoexhibitwildpriceswingsbothupanddown,thereforeadjustingcashflowsisthebestwaytoaccountforthesesymmetricalcountryrisks.Reason3:AlthoughKiani,Oleg,andMalikarealldomiciledinZuflak,eachofthesecompanieswilltendtoresponddifferentlytocountryrisks.Thismakesitvirtuallyimpossibletoadjustthediscountrateforcountryspecificriskandcomeupwithanaccuratevaluationestimate.AftercarefulanalysisbySigmundandhisteam,SigmunddecidesthathewantstohaveexposuretoZuflakinhisinternationalportfolios.Heisstillunsurehowever,whatthebestwaywouldbetoestablishtheexposure.SigmunddiscusseshisconcernswithSteveSolak,anotherportfoliomanagerwithPGA.SolaksuggeststhatSigmundconsiderusingaclosed-endcountryfundtoinvestinZuflak.SolakhandsSigmundacopyofanotethathehadprovidedtoaclientlistingfactsaboutcountry-specificclosedendfunds.Thenotecontainedthefollowingstatements:Closed-endcountryfundsprovideanexcellentmeanstoaccesslocalforeignmarkets.Evennationsthathaverestrictionsonforeigninvestmentaresometimesaccessibleusingclosed-endcountryfunds.Closed-endcountryfundsissueafixednumberofsharesandareagreatwaytodiversifyaU.S.-dollarstockportfoliobecauseoftheirlowcorrelationwiththeU.S.stockmarket.SigmundthanksSolakfortheinformationandheadsbacktohisoffice.Asheisleaving,SolakaskshimifhewouldhavetimelaterthatafternoontodiscusstheuseofAmericanDepositoryReceipts(ADRs).Part1)WhatisthebestestimateofthecountryriskpremiumforZuflak?()A.0.25%.B.1.50%.C.2.75%.D.6.00%.Part2)TodetermineavaluationestimateforOleg,Testorfassumesthatlocalinvestorsrequirea5percentrealrateofreturnoncompanieswithsimilarrisktoOleg.WhatisOleg’sprice-to-earnings(P/E)ratio,ifthecompanyhasaninflationflow-throughrateof65percent?()A.13.75.B.5.33.C.3.00.D.21.25Part3)InregardtoTestorf’sreasonsforincorporatingemergingmarketriskintothevaluationofZuflakbyadjustingcashflowsratherthanadjustingthediscountrate,whichofthefollowingisTRUE?()A.Reasons1and3supportTestorf’scashflowadjustment,butreason2doesnot.B.AllthreeofthereasonsgivensupportTestorf’scashflowadjustment.C.Reasons2and3supportTestorf’scashflowadjustment,butreason1doesnot.D.Reason1supportsTestorf’scashflowadjustment,butreasons2and3donot.Part4)Duetothehighinflationrateofthelocalcountry,Testorfcalculatesthereturnoninvestedcapital(ROIC)forKianibyrevaluingthecompany’sfixedassets.IncomparingtheperformanceofZuflaktootherlocalcompanies,theROICcalculationshould:()A.Excludegoodwill.B.Excludedepreciation.C.Notrevaluefixedassets.D.Excludenetoperatingprofitadjustedfortaxes.Part5)WithregardtoSolak’snoteconcerningclosedend-countryfunds:()A.Statement1iscorrect,statement2iscorrect.B.Statement1isincorrect,statement2isincorrect.C.Statement1iscorrect,statement2isincorrect.D.Statement1isincorrect,statement2iscorrect.Explanationsofterms：(10points)1.Realinterestrate2.Windowinstruction3.Specialdrawingrights4.Moneymarketmutualfunds5.PutablebondsQuestion3:PleaselistsomeCapitalMarketInstruments.Question4:WhatkindofEconomicPolicyinanOpenEconomyQuestion5:WhatistheModernQuantityTheoryofMoneyDemand?Question6:Ifyouareapolicymaker,whatareyourUltimateTargetsofMonetaryPolicy?

參考答案1.BCCCB，ABAAD

ReadingComprehension:(10points)

Part1)

Youranswer:ThecorrectanswerwasA!

BecauseaU.S.denominatedlocalgovernmentbonddoesnotexist,thefollowingformulamustbeusedtocalculatethecountryriskpremium:

Localgovernmentbondyield(non–USdollardenominated)

-U.S.10yearT-bondyield

-InflationdifferentialbetweenlocalcountryandU.S.

-YieldspreadbetweencomparablyratedU.S.corporateandU.S.T-bondyields

=CountryRiskPremium

CountryRiskPremium=11.50–4.50–(6.50-3.00)–(7.75-4.50)

=11.50–4.50–3.50–3.25

=0.25

NotethatifaU.S.denominatedlocalgovernmentbonddidexist,wewouldusethatbondinourcalculationandwouldnotincludetheinflationdifferential.

Part2)

Youranswer:ThecorrectanswerwasA!

P0/E1=1/[realrequiredreturn+(1–inflationflow-throughrate)×inflationrate]

=1/[0.05+(1-.65)×0.065]

=1/[0.05+0.02275]

=1/0.07275=13.75

Part3)

Youranswer:ThecorrectanswerwasA!

Althoughemergingmarketriskcanbeincorporatedintothevaluationprocesseitherbyadjustingthediscountrate(requiredreturn),orbyadjustingcashflowsinascenarioanalysis,evidencesuggeststhatcountryriskscanbebestcapturedthroughcashflowadjustment.Thefourargumentsthatsupportadjustmentstocashflowratherthanadjustingthediscountrateare:

Countryrisksarediversifiable.Modernfinancetheorystatesthatcountryriskscanbediversifiedaway,andthereforeshouldnotbeincludedinthecostofcapital.Testorf’sfirstreasoniscorrect.

Companiesresponddifferentlytocountryrisk.Ageneraldiscountratecannotbeapplieduniformlytoeverycompanyvaluationinthecountrybecauseitwouldnotcapturethedifferentoperatingcharacteristicsofthecompanythatcouldbecapturedbyadjustingthecashflows.Testorf’sthirdreasoniscorrect.

Countryriskisone-sided.Emergingmarketshaveatendencyforcompaniestoexhibitone-sided(downonly)riskprofiles.Therefore,therisksareasymmetricalandadjustingthecashflowsbestcapturestheseasymmetricalrisks.Testorf’ssecondreasonisincorrect.

Identifyingcashfloweffectsaidsriskmanagement.Managerstendtoidentifyspecificfactorsaffectingcashflowandplantomitigatetheirrisksbyadjustingcashflowsratherthanadjustingthediscountrate.

Part4)

Youranswer:ThecorrectanswerwasA!

WhencalculatingROIC,excludinggoodwillisusefulforcomparingdifferentlocalcompaniesandevaluatingtrends.Goodwillcandistortthecomparisonwhenfirmshavedifferinglevelsofgoodwill.ROICthatincludesgoodwillmeasuresreturnsgeneratedbythefirm’sacquisitionsbasedontheuseofitsinvestors’capital,andisusedfordeterminingwhetherornotthecompanyearnedanacceptablerateofreturnoveritscostofcapital.Notethatrevaluationisalsoimportanthere.ROICincludingrevaluationoffixedassetsmeasuresthecompany’soperatingperformance,andisalsousefulforcomparingdifferentcompaniesandevaluatingtrends.

Part5)

Youranswer:ThecorrectanswerwasC!

Closed-endcountryfundsprovideasimplewaytoaccesslocalforeignmarketswhileachievinginternationaldiversification.Oneoftheadvantagesofclosed-endcountryfundsisthatinvestorsoftenhavegreateraccesstoemergingmarkets,eventhosefromcountriesthattendtorestrictforeigninvestment.Thisisduetothefactthatredemptionsarelessofaconcerntotheemergingmarketgovernmentbecausethenumberofsharesofthefundisfixed,andredemptionsdonotresultincapitaloutflows.Statement1onSolak’snoteiscorrect.

Oneofthedisadvantagesofclosed-endcountryfundsisthattheymaytradeatasignificantdiscountpremiumordiscounttotheirNAV.AlthoughtheactualperformanceofthestockwithintheclosedendfundmayhavealowcorrelationwiththeU.S.market,theNAVofthefundmaybehighlycorrelatedwiththeU.S.market,thusreducingthebenefitofinternationaldiversification.Statement2onSolak’snoteisincorrect.

Explanationsofterms：(10points)

1.Realinterestrate:Realinterestrateisthenominalrateyouearncorrectedforthechangeinthepurchasingpowerofmoneyorfortheexpectedinflation.Roughlyspeaking,therealinterestrateisthedifferencebetweenthenominalinterestrateandtheinflationrate,orthenominalinterestrateminustheinflationrate.

2.Windowinstruction:Itreferstothecaseinwhichacentralbanksetstheamountofloanstoincreaseordecreaseforeachseasonforcommercialbanksandrequiresbankstoobeytheinstruction.Themeasureisnotformulatedbythelaw,butitisonlyaninstructiongivenbythecentralbankofacountry.

3.Specialdrawingrights:Aninternationaltypeofmonetaryreservecurrency,createdbytheInternationalMonetaryFund(IMF)in1969,whichoperatesasasupplementtotheexistingreservesofmembercountries.

4.Moneymarketmutualfunds:Fundsthatissuesharestosaversbackedbyholdingsofhigh-qualityshort-termassets.

5.Putablebonds:Aputablebondgrantsthebondholdertherighttoselltheissuebacktotheissueratparvalueondesignateddates.Theadvantagetothebondholderisthatifinterestratesriseaftertheissuedate,therebyreducingthemarketvalueofthebond,thebondholdercansellthebondbacktotheissueratpar.

Question3：

Answer:

Thecapitalmarketisextremelyimportantbecauseitraisesthefundsneededbynetborrowerstocarryouttheirspendingandinvestmentplans.Asmoothlyfunctioningcapitalmarketinfluenceshowfasttheeconomygrows.

(1)Bonds

Bondsarelong-termdebtobligationsissuedbycorporationsandgovernmentunits.Proceedsfromabondissueareusedtoraisefundstosupportlong-termoperationsoftheissuer(e.g.,forcapitalexpenditureprojects).Inreturnfortheinvestor’sfundsbondissuerspromisetopayaspecifiedamountinthefutureonthematurityofthebond(thefacevalue)pluscouponinterestontheborrowedfunds(thecouponratetimesthefacevalueofthebond).Ifthetermsoftherepaymentarenotmetbythebondissuer,thebondholder(investor)hasaclaimontheassetsofthebondissuer.Bondmarketsaremarketsinwhichbondsareissuedandtraded.Theyareusedtoassistinthetransferoffundsfromindividuals,corporations,andgovernmentunitswithexcessfundstocorporationsandgovernmentunitsinneedoflong-termdebtfunding.

(2)Stocks

Stocksareequityclaimsrepresentingownershipofthenetincomeandassetsofacorporation.Theincomethatstockholdersreceivefortheirownershipiscalleddividends.Therearetwotypesofstocks,commonandpreferred.Ashareofcommonstockinafirmrepresentsanownershipinterestinthatfirm.Preferredstockisaformofequityfromalegalandtaxstandpoint.Preferredstockpaysafixeddividend,andintheeventofbankruptcyofthecorporation,theownersofpreferredstockareentitledtobepaidfirstbeforethecorporation’sothercreditors.Commonstockpaysavariabledividend,dependingontheprofitsthatareleftoverafterpreferredstockholdershavebeenpaidandretainedearningssetaside.

(3)Funds

Inanarrowsense,fundisareserveofmoneysetasideforsomepurpose.Ingeneral,fundmeansafinancialinstitutionthatsellssharestoindividualsandinvestsinsecuritiesissuedbyothercompanies.Asyouprobablyknow,mutualfundshavebecomeextremelypopularoverthelast20years.Whatwasoncejustanotherobscurefinancialinstrumentisnowapartofourdailylives.Morethan80millionpeople,orhalfofthehouseholdsinAmerica,investinmutualfunds.Thatmeansthat,intheUnitedStatesalone,trillionsofdollarsareinvestedinmutualfunds.Infact,tomanypeople,investingmeansbuyingmutualfunds.Afterall,it’scommonknowledgethatinvestinginmutualfundsis(oratleastshouldbe)betterthansimplylettingyourcashwasteawayinasavingsaccount,but,formostpeople,that’swheretheunderstandingoffundsends.Itdoesn’thelpthatmutualfundsalespeoplespeakastrangelanguagethatisinterspersedwithjargonthatmanyinvestorsdon’tunderstand.Originally,mutualfundswereheraldedasawayforthelittleguytogetapieceofthemarket.InsteadofspendingallyourfreetimeburiedinthefinancialpagesoftheWallStreetJournal,allyouhadtodowasbuyamutualfundandyou’dbesetonyourwaytofinancialfreedom.Asyoumighthaveguessed,it’snotthateasy.Mutualfundsareanexcellentideaintheory,but,inreality,theyhaven’talwaysdelivered.Notallmutualfundsarecreatedequal,andinvestinginmutualsisn’taseasyasthrowingyourmoneyatthefirstsalespersonwhosolicitsyourbusiness.

Question4：

Answer:

Internationaleconomicpolicyreferstoactivitiesofnationalgovernmentsthataffectthemovementoftradeandfactorinputsamongnations.Includedarenotonlytheobviousmeasuressuchasimporttariffsandquotas,butalsodomesticmeasuressuchasmonetarypolicyandfiscalpolicy.Policiesthatareundertakentoimprovetheconditionsofonesectorinanationtendtohaverepercussionsthatspilloverintoothersectors.Sinceaneconomy’sinternal(domestic)sector,onecannotdesignateeconomicpoliciesaspurelydomesticorpurelyforeign.Rather,theeffectsofeconomicpolicyshouldbeviewedasbeinglocatedonacontinuumbetweentwopoles—aninternal-effectspoleandanexternal-effectspole.AlthoughthePrimaryimpactofanimportrestrictionisonanation’stradebalance,forexample,therearesecondaryeffectsonnationaloutput,employment,andincome.Mosteconomicpolicesarelocatedbetweentheexternalandinternalpolesratherthanfallingdirectlyoneitherone.

Question5：

Answer:

(1)ThemodernquantitytheoryofmoneyreferstothemonetarytheorydevelopedbytheChicagoSchool.Fromthelate1940sthroughthe1990s,agroupofeconomists,associatedinvaryingdegreeswithChicagoSchool,builduponthetraditionsofclassicaleconomicswiththebenefitofmoderntheoreticalandstatisticaltechniques.RepresentedbyMiltonFriedman,originallylabeledtheChicagoSchool,butcurrentlyreferredtoeitherasmonetaristsornewclassicalmacroeconomists,thisinformalgrouphasproducedasetofideaswithimportantimplicationsfortheroleofmoneyintheeconomy.In1956,Friedmanpublishedhispaper"TheQuantityTheoryofMoneyDemand—ARestatement",whichmarkedtheemergenceofthemodernquantitytheoryofmoney.Ononehand,FriedmanacceptedtheCambridgeSchoolandKeynes’sthoughtthatmoneyisanassetandthedemandformoneyispeople’sbehaviorofchoosingassets;ontheotherhand,Friedmanbasicallyadoptedtheconclusionofthetraditionalquantitytheoryofmoney,i.e.,thechangeofthequantityofmoneyisthecauseofthemovementofpricelevel.

(2)Inhisdesignofthefunctionofdemandformoney,Friedmantookintoconsiderationthetwofactors;first,thetotalwealthexpressedwithpermanentincomewhichisinareverseratiotothedemandformoney;second,thedifferencebetweenexpectedratesofreturnofholdingmoneyandotherassets.Thehighertherateofreturnofotherassets,theweakerpeople’sdesiretoholdmoney.Friedmandidnotanalyzepeople’smotivesofholdingmoneylikeKeynes,butcontinuedtostudythecausesofholdingmoneyandthoughtthattherearemanydifferentfactorsaffectingthedemandformoney.Friedmanusedafunctiontoexpressthedemandformoney:

Md/P=f(Yp,Rm,Rb,Rf,P,W,U)

Md/P:thedemandforrealmoneybalances,

Yp;TherealGDP,theindexusedtocountwealth,calledpermanentincome,

Rm;Theexpectedrateofreturnformoney,

Rb:Theexpectedrateofreturnforbonds,

Re:Theexpectedrateofreturnforstocks(commonstocks),

P;Theexpectedrateofreturnofgoodsorexpectedrateofinflation,

W;Theratioofnon-humanwealthtohumanwealth,

U;Otherrandomvariables,includingpreference,custom,technology,system,etc.

(3)InFriedman’sview,thewealthaffectingthemoneydemandispermanentandthemoneydemandwillnotfluctuatewithupsanddownsofbusinesscyclesbecausethepermanentincomefluctuatesalittleinshortrun.Generallyspeaking,thedemandforanassethasapositiveinterrelationwiththewealthpeoplehold.Sincemoneyisanasset,thedemandformoneyhasapositiveinterrelationwithwealth(Yp).Friedmanheldthatfactorsaffectingmoneydemandaretheexpectedrateofreturnoftheassetsthatcansubstitutemoney.Besidesholdingwealthintheformofmoney,peoplecanholdtheirwealthinotherforms,say,bonds,stocks(commonstocks)andgoods.Theopportunitycostofholdingmoneyisexpressedbytheexpectedrateofreturnofotherassetscomparedwithmoney.Whentheexpectedratesofreturnofbonds(Rb)andstocks(Re)risetheopportunitycostofholdingmoneywillincreasewhichwillresultinlessdemandformoney.Thehighertheexpectedrateofreturnofotherassets,thelessthedemandformoney.Pistheexpectedrateofreturnofholdingwealthintheformofgoodscomparedwithmoney.Whenthepricesofgoodsrise,therateofreturnofgoodsequalstherateofinflationrate.Whentheexpectedrateofreturnofgoodsishighercomparedwiththatofholdingmoney,peoplewilldowellto"beatthehigherprices"bypurchasinggoodssoonerthanusual(thisisthe"expectationseffect").Thiswillreducethedemandformoney.Wistheratioofnon-humanwealthtohumanwealth.Non-humanwealthreferstobonds,stocksandotherrealassets,whilehumanwealthreferstoindividuals’abilitytomakemoney.Thisratioconstrainspeople’sincome,e.g.;humanwealthcannotbeobtainedwhenlaborforceisinastateofunemployment,whichnaturallyreducesthedemandformoney.Givencertainlevelofwealth,thelargertheW,thesmallerthemoneydemand.Uwhichreferstootherrandomvariablesisinanegativecorrelationwiththemoneydemand.

Monetaristsadheretovirtuallyallthetenetsofclassicaleconomists.However,theymadesomemodifications.SomeofthemhaveusedthequantitytheoryasaframeworkfordescribingtherelationshipbetweenMandPYratherthanjustMandPandviewtheinvisiblehandaspushingtheeconomytowardthefullemploymentlevelofproduction.AsecondmodificationofclassicalthoughtoccurredinMiltonFriedman’srevivalofthequantitytheoryisthatFriedmanreplacedtheideaofthestabilityofvelocitywiththelessmilitantnotionthatitispredictable.Or,moneydemandmaynotbeafixedfractionoftotalspending;itisrelatedtoPYinacloseandpredictableway.

Perhapsthemostimportantclassicaltraditionupheldbymodernmonetaristsistheinherentstabilityoftheeconomyatfullemployment.Thisexplainsthemonetaristrejectionofgovernmentalattemptstofine-tuneeconomicactivity.Ahigherlevelofeconomicactivityrequiresmorecapitalandlaborortechnologicalimprovements;moremoneyonlyleadstoinflation.Theanswertocyclicaldownturnsistowaitforthenaturalupturn.Governmentinterventionisunnecessaryandpotentiallydamaging.

Question6：

Answer:

TheFourUltimateTargetsofMonetaryPolicy

Thefourtargetsofmonetarypolicyinclude:

(1)Economicgrowth,

(2)Pricestability,

(3)Fullemployment,and

(4)Balanceofpaymentsequilibrium.

(1)Economicgrowth

Economicgrowthreferstothegrowthofanation’sGDPwhichisthetotalvalueofgoodsandservicesdomesticallyproduced.People’slivingstandardhasincreaseddramaticallyoverhistoryasresultofthegrowthoftheeconomyanditsproductivity.Butgrowthmeansmorethanmerelyincreasingtotaloutput.Itrequiresthatoutputincreasefasterthanthepopulationsothattheaverageoutputperpersonexpands.Economicgrowthineverycountryisthefirsttargetofmonetarypolicy.Withoutcertaingrowthrate,nationaleconomywillbeinastateofstoporshrinkageanditwillbeimpossibletoenhanceanation’seconomicstrengthandraisepeople’slivingstandard.

(2)Pricestability

Pricestabilitymeansthestabilityofcurrencyvalueandcontrolofinflationwithoutgreatchangeofpricelevelwithincertainperiod.Thepricestabilityreflectsthegeneraltrendofpricechangeoraveragelevel.Inmoderneconomicsociety,thegeneralpricelevelshowsarisingtrendinfact.Pricestabilityistolimittheincreaserateofthepricelevelofacertainperiodwithincertainscope.Asforthecertainscopewithinwhichtheincreaserateofpricelevelshouldbekept,therearedifferentviewsamongeconomists.Generallyspeaking,iftherisingrateofpriceleveliswithin2%—3%,itcanbecalledpricestability.Consistentlystablepriceshelpcreateanenvironmentinwhichtheothereconomictarg