Question 1

The central bank in the United States is:

Accepted Answer

A)  the Bank of America. 
B)  the Federal Reserve. 
C)  the U.S. Treasury. 
D)  the Bank of the United States. 
A)  the Bank of America. 
B)  the Federal Reserve. 
C)  the U.S. Treasury. 
D)  the Bank of the United States. B

Question 2

The specific goals of central banks include each of the following, except:

Accepted Answer

A)  high and stable real growth. 
B)  low and stable inflation. 
C)  high levels of exports. 
D)  low and stable unemployment. 
A)  high and stable real growth. 
B)  low and stable inflation. 
C)  high levels of exports. 
D)  low and stable unemployment. C

Question 3

The monetary policy framework is:

Accepted Answer

A)  the law that created the Federal Reserve System. 
B)  the idea that central banks should be interconnected across countries. 
C)  a way to prioritize and implement the central bank's objectives when they are in conflict. 
D)  a growing belief that there should be one central bank headquartered at the World Bank. 
A)  the law that created the Federal Reserve System. 
B)  the idea that central banks should be interconnected across countries. 
C)  a way to prioritize and implement the central bank's objectives when they are in conflict. 
D)  a growing belief that there should be one central bank headquartered at the World Bank. C

Question 4

Most economists agree that the target rate of inflation for the central banks should be:

Accepted Answer

A)  between 7 and 9 percent. 
B)  less than zero. 
C)  above zero for fears of deflation. 
D)  something over 3 but less than 6 percent. 
A)  between 7 and 9 percent. 
B)  less than zero. 
C)  above zero for fears of deflation. 
D)  something over 3 but less than 6 percent.

Question 5

The means for assuring accountability and transparency:

Accepted Answer

A)  may differ across the central banks of different countries. 
B)  are the same for all successful central banks. 
C)  involve setting specific numerical targets so there is no confusion as to what the goal is. 
D)  are opposite to each other; increasing one means decreasing the other. 
A)  may differ across the central banks of different countries. 
B)  are the same for all successful central banks. 
C)  involve setting specific numerical targets so there is no confusion as to what the goal is. 
D)  are opposite to each other; increasing one means decreasing the other.

Question 6

Most economists agree that a well-designed central bank would:

Accepted Answer

A)  be independent of political pressure. 
B)  make its policy actions difficult to interpret. 
C)  be accountable only to other banks. 
D)  be run by one key policy maker. 
A)  be independent of political pressure. 
B)  make its policy actions difficult to interpret. 
C)  be accountable only to other banks. 
D)  be run by one key policy maker.

Question 7

Potential output depends on all of the following except:

Accepted Answer

A)  technology. 
B)  the number of firms in the economy. 
C)  the size of the capital stock. 
D)  the number of people who can work. 
A)  technology. 
B)  the number of firms in the economy. 
C)  the size of the capital stock. 
D)  the number of people who can work.

Question 8

Over very long periods, U.S. real economic growth averaged around:

Accepted Answer

A)  3 percent per year. 
B)  1 percent per year. 
C)  5 percent per year. 
D)  7 percent per year. 
A)  3 percent per year. 
B)  1 percent per year. 
C)  5 percent per year. 
D)  7 percent per year.

Question 9

In the U.S. the authority to issue currency is held by:

Accepted Answer

A)  the Federal Reserve. 
B)  the U.S. Treasury. 
C)  the Office of the Comptroller of the Currency. 
D)  the U.S. Mint. 
A)  the Federal Reserve. 
B)  the U.S. Treasury. 
C)  the Office of the Comptroller of the Currency. 
D)  the U.S. Mint.

Question 10

The interest rate decisions made by the Federal Open Market Committee:

Accepted Answer

A)  can be overridden by the President. 
B)  can be overridden by the Secretary of the Treasury. 
C)  can be overridden by the U.S. Senate by a two-thirds majority. 
D)  cannot be overridden by anyone outside of the Federal Reserve. 
A)  can be overridden by the President. 
B)  can be overridden by the Secretary of the Treasury. 
C)  can be overridden by the U.S. Senate by a two-thirds majority. 
D)  cannot be overridden by anyone outside of the Federal Reserve.

Question 11

Explain why it is correct to say the Federal Reserve functions as the government's bank but it is incorrect to say it controls the government's budget.

Accepted Answer

In its role as the government's bank, th

Question 12

Which of the following statements is not true?

Accepted Answer

A)  The potential growth rate in the U.S. economy may have fallen following the financial crisis of 2007-2009. 
B)  Periods of growth below the potential level are periods of low unemployment. 
C)  Periods of growth above the potential level are periods of low employment. 
D)  Periods of growth below the potential level are periods of high unemployment. 
A)  The potential growth rate in the U.S. economy may have fallen following the financial crisis of 2007-2009. 
B)  Periods of growth below the potential level are periods of low unemployment. 
C)  Periods of growth above the potential level are periods of low employment. 
D)  Periods of growth below the potential level are periods of high unemployment.

Question 13

Today there is a clear consensus about the best way to design a central bank. What are the criteria for a successful central bank?

Accepted Answer

To be successful, a central bank must (1

Question 14

Setting an explicit numerical inflation target is most associated with the goal(s) of:

Accepted Answer

A)  transparency. 
B)  accountability. 
C)  both transparency and accountability. 
D)  neither transparency nor accountability; it's about moral hazard. 
A)  transparency. 
B)  accountability. 
C)  both transparency and accountability. 
D)  neither transparency nor accountability; it's about moral hazard.

Question 15

Explain why inflation is a way for governments to default on a portion of the debts they owe.

Accepted Answer

If a government forces the central bank

Question 16

For fiscal policymakers, one of the results of an independent central bank is:

Accepted Answer

A)  to finance government spending the Treasury has to order more currency from the central bank. 
B)  fiscal policymakers always have to borrow to increase spending. 
C)  fiscal policymakers cannot borrow unless the Federal Reserve prints more money. 
D)  increased government spending has to be financed with either higher taxes or increased government borrowing. 
A)  to finance government spending the Treasury has to order more currency from the central bank. 
B)  fiscal policymakers always have to borrow to increase spending. 
C)  fiscal policymakers cannot borrow unless the Federal Reserve prints more money. 
D)  increased government spending has to be financed with either higher taxes or increased government borrowing.

Question 17

Predict how monetary policymaking would change, if at all, if members of the Board of Governors of the Federal Reserve were popularly elected to two-year terms and could run for re-election.

Accepted Answer

There would likely be many changes and n

Question 18

The apparent result of central bank independence has been better performing economies. Why do you think it took so long for many countries to create independent central banks?

Accepted Answer

One reason is that central banks were cr

Question 19

The Federal Reserve didn't always communicate its actions to the public like it does today. As recently as the mid-1990s, secrecy ruled. Why do you think the Fed and most central banks now are more public about their actions and the reasons for them?

Accepted Answer

In principles of economics we learn that

Question 20

What are the specific objectives of most central bankers?

Accepted Answer

Most central bankers pursue five specifi

Exam 15: Central Banks in the World Today

The central bank in the United States is:

The specific goals of central banks include each of the following, except:

The monetary policy framework is:

Most economists agree that the target rate of inflation for the central banks should be:

The means for assuring accountability and transparency:

Most economists agree that a well-designed central bank would:

Potential output depends on all of the following except:

Over very long periods, U.S. real economic growth averaged around:

In the U.S. the authority to issue currency is held by:

The interest rate decisions made by the Federal Open Market Committee:

Explain why it is correct to say the Federal Reserve functions as the government's bank but it is incorrect to say it controls the government's budget.

Which of the following statements is not true?

Today there is a clear consensus about the best way to design a central bank. What are the criteria for a successful central bank?

Setting an explicit numerical inflation target is most associated with the goal(s) of:

Explain why inflation is a way for governments to default on a portion of the debts they owe.

For fiscal policymakers, one of the results of an independent central bank is:

Predict how monetary policymaking would change, if at all, if members of the Board of Governors of the Federal Reserve were popularly elected to two-year terms and could run for re-election.

The apparent result of central bank independence has been better performing economies. Why do you think it took so long for many countries to create independent central banks?

The Federal Reserve didn't always communicate its actions to the public like it does today. As recently as the mid-1990s, secrecy ruled. Why do you think the Fed and most central banks now are more public about their actions and the reasons for them?

What are the specific objectives of most central bankers?

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange Rate Policy and the Central Bank

Money Growth, Money Demand and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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