Question 1

The idea that central banks should be independent of political pressure is an idea that:

Accepted Answer

A)  has been around since there were central banks. 
B)  is relatively new. 
C)  every central bank was founded upon. 
D)  became quite popular in the early 1900s. 
A)  has been around since there were central banks. 
B)  is relatively new. 
C)  every central bank was founded upon. 
D)  became quite popular in the early 1900s.

Question 2

Keeping interest rates stable is:

Accepted Answer

A)  the most important goal for a central bank. 
B)  a key goal, because stable interest rates will result in all other goals being achieved. 
C)  a secondary goal for central banks. 
D)  not a goal of the central bank. 
A)  the most important goal for a central bank. 
B)  a key goal, because stable interest rates will result in all other goals being achieved. 
C)  a secondary goal for central banks. 
D)  not a goal of the central bank.

Question 3

The rationale for the existence of central banks is mainly that:

Accepted Answer

A)  financial markets lack transparency. 
B)  they are needed for the supervision of banks. 
C)  financial intermediation cannot occur without a central bank. 
D)  financial systems are prone to periods of extreme volatility. 
A)  financial markets lack transparency. 
B)  they are needed for the supervision of banks. 
C)  financial intermediation cannot occur without a central bank. 
D)  financial systems are prone to periods of extreme volatility.

Question 4

The chairman of the Fed gives a speech and hints that, at the next meeting of the Open Market Committee, the issues of a rapidly growing economy and preliminary indications of rising prices will have to be addressed. You are in the market for a new house and your mortgage broker calls to tell you that the interest rate on the $100,000, 30-year mortgage you applied for has just increased by a quarter of a percent. Why did the rate increase even though the Fed has not announced any rate change?

Accepted Answer

The rate increased because many people i

Question 5

Central banks often find:

Accepted Answer

A)  they can efficiently pursue all of their goals simultaneously. 
B)  there are tradeoffs that make pursuing all of their goals simultaneously impossible. 
C)  the goal(s) they pursue will be determined by their profitability. 
D)  they must keep their goals secret or else they cannot be attained. 
A)  they can efficiently pursue all of their goals simultaneously. 
B)  there are tradeoffs that make pursuing all of their goals simultaneously impossible. 
C)  the goal(s) they pursue will be determined by their profitability. 
D)  they must keep their goals secret or else they cannot be attained.

Question 6

The Federal Reserve's Fedwire system is used mainly to provide:

Accepted Answer

A)  a means for foreign banks to transfer funds to U.S. banks. 
B)  an inexpensive and reliable way for financial institutions to transfer funds to one another. 
C)  an inexpensive way for individuals to pay their bills on-line. 
D)  a means for the Treasury to collect tax payments. 
A)  a means for foreign banks to transfer funds to U.S. banks. 
B)  an inexpensive and reliable way for financial institutions to transfer funds to one another. 
C)  an inexpensive way for individuals to pay their bills on-line. 
D)  a means for the Treasury to collect tax payments.

Question 7

Imagine you own a retail mail order business. You produce your catalog, where items and prices are listed, in January and you use the same catalog all year. The central bank in your country increases the money supply by an amount to cause inflation to average one percent each month. Ignoring any seasonality in sales (like the holiday season), what should happen to your sales as the year progresses and why?

Accepted Answer

As the year progresses sales should incr

Question 8

In terms of economic growth, the central bank would like to:

Accepted Answer

A)  have the maximum growth rate possible. 
B)  keep the growth rate averaging zero. 
C)  keep the economy close to its potential or sustainable rate of growth. 
D)  balance every recession with a boom. 
A)  have the maximum growth rate possible. 
B)  keep the growth rate averaging zero. 
C)  keep the economy close to its potential or sustainable rate of growth. 
D)  balance every recession with a boom.

Question 9

Stable inflation implies:

Accepted Answer

A)  that the rate of inflation averaged over many years is zero. 
B)  that inflation is predictable. 
C)  that the rate of inflation conceals relative price changes. 
D)  low rates of unemployment. 
A)  that the rate of inflation averaged over many years is zero. 
B)  that inflation is predictable. 
C)  that the rate of inflation conceals relative price changes. 
D)  low rates of unemployment.

Question 10

Today, most central banks announce their policy actions:

Accepted Answer

A)  one year after the policy is put in place. 
B)  almost immediately. 
C)  within a 3 to 5 year "window". 
D)  usually six months after the policy is put in place. 
A)  one year after the policy is put in place. 
B)  almost immediately. 
C)  within a 3 to 5 year "window". 
D)  usually six months after the policy is put in place.

Question 11

Successful monetary policy relies most on:

Accepted Answer

A)  having an ample supply of highly qualified people. 
B)  luck. 
C)  the institutional environment. 
D)  knowledgeable citizens who know how to react to the policy. 
A)  having an ample supply of highly qualified people. 
B)  luck. 
C)  the institutional environment. 
D)  knowledgeable citizens who know how to react to the policy.

Question 12

Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.

Accepted Answer

We can borrow one from the text. By mid-

Question 13

Central bank accountability means:

Accepted Answer

A)  politicians will establish goals and central bankers will report on their progress. 
B)  central bankers are not accountable to any elected officials. 
C)  central bankers are only accountable to the banks in their respective countries. 
D)  central bankers must hold press conferences to explain their monetary policy views. 
A)  politicians will establish goals and central bankers will report on their progress. 
B)  central bankers are not accountable to any elected officials. 
C)  central bankers are only accountable to the banks in their respective countries. 
D)  central bankers must hold press conferences to explain their monetary policy views.

The idea that central banks should be independent of political pressure is an idea that:

Keeping interest rates stable is:

The rationale for the existence of central banks is mainly that:

Central banks often find:

The Federal Reserve's Fedwire system is used mainly to provide:

In terms of economic growth, the central bank would like to:

Stable inflation implies:

Today, most central banks announce their policy actions:

Successful monetary policy relies most on:

Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.

Central bank accountability means:

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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Exam 15: Central Banks in the World Today

The idea that central banks should be independent of political pressure is an idea that:

Keeping interest rates stable is:

The rationale for the existence of central banks is mainly that:

Central banks often find:

The Federal Reserve's Fedwire system is used mainly to provide:

In terms of economic growth, the central bank would like to:

Stable inflation implies:

Today, most central banks announce their policy actions:

Successful monetary policy relies most on:

Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.

Central bank accountability means:

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

Filters