Question 1

The operational components required for truly independent central banks include:

Accepted Answer

A)  a budget controlled by Congress. 
B)  the ability to have policies reversed. 
C)  monetary policies that cannot be reversed by anyone outside of the central bank. 
D)  the chairperson of the bank being answerable only to the President. 
A)  a budget controlled by Congress. 
B)  the ability to have policies reversed. 
C)  monetary policies that cannot be reversed by anyone outside of the central bank. 
D)  the chairperson of the bank being answerable only to the President.

Question 2

Imagine a central banker who takes office believing that, ultimately, the best way to stimulate an economy is to keep people guessing. This means the policymaker will often, but not always, announce one change but then actually do something else. What do you think of the central bank's chances for achieving its objectives and why?

Accepted Answer

This violates one of the requirements of

Question 3

In the United States, one problem with central bank independence is:

Accepted Answer

A)  it is almost impossible to obtain because Congress controls the budget of the Federal Reserve. 
B)  in a representative democracy, monetary policymakers must be held accountable to the public. 
C)  central bank independence has not produced favorable results. 
D)  the central bank can control policy, but the U.S. Treasury issues currency. 
A)  it is almost impossible to obtain because Congress controls the budget of the Federal Reserve. 
B)  in a representative democracy, monetary policymakers must be held accountable to the public. 
C)  central bank independence has not produced favorable results. 
D)  the central bank can control policy, but the U.S. Treasury issues currency.

Question 4

The number of central banks that exist in the world today is:

Accepted Answer

A)  less than 10. 
B)  about 250. 
C)  over 180. 
D)  over 50 but less than 100. 
A)  less than 10. 
B)  about 250. 
C)  over 180. 
D)  over 50 but less than 100.

Question 5

The central bank for the euro area tries to achieve accountability and transparency through a:

Accepted Answer

A)  standard numerical objective for inflation over the medium term. 
B)  specific target for unemployment and economic growth. 
C)  following the monetary policy guidance of the European Parliament. 
D)  specific target for the dollar euro exchange rate. 
A)  standard numerical objective for inflation over the medium term. 
B)  specific target for unemployment and economic growth. 
C)  following the monetary policy guidance of the European Parliament. 
D)  specific target for the dollar euro exchange rate.

Question 6

What are the operational components of central bank independence?

Accepted Answer

There are two operational components of

Question 7

What may be the reasons that explain the observation that during periods of hyperinflation economic growth actually slows or even contracts?

Accepted Answer

Periods of hyperinflation or highly unst

Question 8

In a survey of forecasters toward the end of the financial crisis of 2007-2009, forecast inflation rates for the next decade in the United States were:

Accepted Answer

A)  0%. 
B)  2%. 
C)  4%. 
D)  7%. 
A)  0%. 
B)  2%. 
C)  4%. 
D)  7%.

Question 9

If we think back to Chapter 11 when we discussed moral hazard, discuss how a government ceding the right to control the amount of currency to a central bank is a way to treat a potential moral hazard problem.

Accepted Answer

Government officials have a variety of o

Question 10

Which of the following statements regarding growth was brought out from the material in Chapter 15?

Accepted Answer

A)  Stability results in higher output growth rates. 
B)  Inflation volatility results in higher output growth rates. 
C)  There is no correlation between the volatility in growth rates and annual output growth. 
D)  The more volatile the growth rate, the higher is the annual output growth. 
A)  Stability results in higher output growth rates. 
B)  Inflation volatility results in higher output growth rates. 
C)  There is no correlation between the volatility in growth rates and annual output growth. 
D)  The more volatile the growth rate, the higher is the annual output growth.

Question 11

Which is a function of modern central banks?

Accepted Answer

A)  To control securities markets 
B)  To control the government's budget 
C)  To control the availability of money and credit 
D)  To manage fiscal policy 
A)  To control securities markets 
B)  To control the government's budget 
C)  To control the availability of money and credit 
D)  To manage fiscal policy

Question 12

Which of the following statements is true?

Accepted Answer

A)  Printing currency can be a profitable venture for a government. 
B)  Printing currency, while necessary, is a losing venture for a government. 
C)  Printing too much money usually leads to lower prices. 
D)  In the modern economy the amount of money created has no effect on prices. 
A)  Printing currency can be a profitable venture for a government. 
B)  Printing currency, while necessary, is a losing venture for a government. 
C)  Printing too much money usually leads to lower prices. 
D)  In the modern economy the amount of money created has no effect on prices.

Question 13

The correlation between high rates of inflation and economic growth is:

Accepted Answer

A)  direct; one brings about the other. 
B)  inverse; high inflation usually means low economic growth. 
C)  there is no correlation between these measures. 
D)  is direct at low rates of economic growth and inverse at high rates. 
A)  direct; one brings about the other. 
B)  inverse; high inflation usually means low economic growth. 
C)  there is no correlation between these measures. 
D)  is direct at low rates of economic growth and inverse at high rates.

Question 14

Which of the following statements is most true concerning economic policy in the U.S.?

Accepted Answer

A)  Monetary policymakers tend to have a long view while fiscal policymakers tend to ignore the long-run inflationary ramifications of their actions. 
B)  Fiscal policymakers tend to focus on inflation and unemployment while monetary policymakers focus most of their attention on the money supply and the exchange rate. 
C)  Fiscal policymakers tend to focus more on pleasing their constituents and so are willing to sacrifice the short run for the long run. 
D)  Monetary policy independence is enshrined in the U.S. Constitution. 
A)  Monetary policymakers tend to have a long view while fiscal policymakers tend to ignore the long-run inflationary ramifications of their actions. 
B)  Fiscal policymakers tend to focus on inflation and unemployment while monetary policymakers focus most of their attention on the money supply and the exchange rate. 
C)  Fiscal policymakers tend to focus more on pleasing their constituents and so are willing to sacrifice the short run for the long run. 
D)  Monetary policy independence is enshrined in the U.S. Constitution.

Question 15

All of the following are true about central bank independence except that it:

Accepted Answer

A)  is usually given at the pleasure of governments. 
B)  can be eliminated by governments in a time of crisis. 
C)  is usually guaranteed by a country's constitution. 
D)  can be subverted by the actions of fiscal policymakers. 
A)  is usually given at the pleasure of governments. 
B)  can be eliminated by governments in a time of crisis. 
C)  is usually guaranteed by a country's constitution. 
D)  can be subverted by the actions of fiscal policymakers.

Question 16

Central banks are in a position to control risk in the economy because they:

Accepted Answer

A)  control the unemployment rate. 
B)  control the economy's real growth rate. 
C)  control short-term interest rates. 
D)  can change taxes. 
A)  control the unemployment rate. 
B)  control the economy's real growth rate. 
C)  control short-term interest rates. 
D)  can change taxes.

Question 17

Monetary policy in the United States is under the control of:

Accepted Answer

A)  the U. S. Treasury. 
B)  the President. 
C)  the Federal Reserve. 
D)  the U.S. Senate. 
A)  the U. S. Treasury. 
B)  the President. 
C)  the Federal Reserve. 
D)  the U.S. Senate.

Question 18

The ability to create money means the central bank can control:

Accepted Answer

A)  the availability of money and credit in a country's economy. 
B)  tax revenue. 
C)  the unemployment rate. 
D)  government expenditures. 
A)  the availability of money and credit in a country's economy. 
B)  tax revenue. 
C)  the unemployment rate. 
D)  government expenditures.

Question 19

Using the U.S. as an example, explain why rising budget deficits on the part of a federal government creates a potential point of conflict between fiscal and monetary policymakers.

Accepted Answer

Members of Congress and the President ha

Question 20

During the financial crisis of 2007-2009 the U.S. Federal Reserve used its powers in all but which of the following ways:

Accepted Answer

A)  lending to nonbanks. 
B)  accepting very illiquid collateral against its loans. 
C)  lowered bank reserve requirements. 
D)  lowered its policy rate to zero. 
A)  lending to nonbanks. 
B)  accepting very illiquid collateral against its loans. 
C)  lowered bank reserve requirements. 
D)  lowered its policy rate to zero.

Exam 15: Central Banks in the World Today

The operational components required for truly independent central banks include:

In the United States, one problem with central bank independence is:

The number of central banks that exist in the world today is:

The central bank for the euro area tries to achieve accountability and transparency through a:

What are the operational components of central bank independence?

What may be the reasons that explain the observation that during periods of hyperinflation economic growth actually slows or even contracts?

In a survey of forecasters toward the end of the financial crisis of 2007-2009, forecast inflation rates for the next decade in the United States were:

If we think back to Chapter 11 when we discussed moral hazard, discuss how a government ceding the right to control the amount of currency to a central bank is a way to treat a potential moral hazard problem.

Which of the following statements regarding growth was brought out from the material in Chapter 15?

Which is a function of modern central banks?

Which of the following statements is true?

The correlation between high rates of inflation and economic growth is:

Which of the following statements is most true concerning economic policy in the U.S.?

All of the following are true about central bank independence except that it:

Central banks are in a position to control risk in the economy because they:

Monetary policy in the United States is under the control of:

The ability to create money means the central bank can control:

Using the U.S. as an example, explain why rising budget deficits on the part of a federal government creates a potential point of conflict between fiscal and monetary policymakers.

During the financial crisis of 2007-2009 the U.S. Federal Reserve used its powers in all but which of the following ways:

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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