Question 1

The information lag facing the Fed is

Accepted Answer

A)  the difficulty of becoming informed quickly of changes in public opinion about which policy goal is most important. 
B)  the delay in receiving accurate information about the state of the economy. 
C)  the delay in Congress and the president communicating their policy goals for the Fed to act on. 
D)  the time required for monetary policy changes to affect output, employment, and prices. 
A)  the difficulty of becoming informed quickly of changes in public opinion about which policy goal is most important. 
B)  the delay in receiving accurate information about the state of the economy. 
C)  the delay in Congress and the president communicating their policy goals for the Fed to act on. 
D)  the time required for monetary policy changes to affect output, employment, and prices. B

Question 2

The bursting of the dot-com bubble contributed to the

Accepted Answer

A)  Great Depression. 
B)  inflation of the late 1970s. 
C)  recession of 2001. 
D)  financial crisis of 2007-2009. 
A)  Great Depression. 
B)  inflation of the late 1970s. 
C)  recession of 2001. 
D)  financial crisis of 2007-2009. C

Question 3

What is quantitative easing? What was the Fed's objective in implementing quantitative easing?

Accepted Answer

Quantitative easing is a policy when a central bank attempts to stimulate the economy by buying long-term securities.The Fed's objective was to reduce the interest rates on mortgages and on 10-year Treasury notes.Lower interest rates on mortgages could help to spur new home sales.And lower interest rates on 10-year Treasury notes could help to lower interest rates on corporate bonds,thereby increasing investment spending on physical capital.

Question 4

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

Accepted Answer

A)  discount loans do not affect the money supply. 
B)  it does not have as much control over discount loans as it has on open market operations. 
C)  it is prohibited from doing so by an act of Congress. 
D)  it prefers to use reserve requirements. 
A)  discount loans do not affect the money supply. 
B)  it does not have as much control over discount loans as it has on open market operations. 
C)  it is prohibited from doing so by an act of Congress. 
D)  it prefers to use reserve requirements.

Question 5

Reserve requirements are changed

Accepted Answer

A)  more frequently than the discount rate is changed, but less frequently than open market operations are conducted. 
B)  more frequently than the discount rate is changed and more frequently than open market operations are conducted. 
C)  more frequently than open market operations are conducted, but less frequently than the discount rate is changed. 
D)  less frequently than open market operations are conducted and less frequently than the discount rate is changed. 
A)  more frequently than the discount rate is changed, but less frequently than open market operations are conducted. 
B)  more frequently than the discount rate is changed and more frequently than open market operations are conducted. 
C)  more frequently than open market operations are conducted, but less frequently than the discount rate is changed. 
D)  less frequently than open market operations are conducted and less frequently than the discount rate is changed.

Question 6

Which of the following best describes a policy of inflation targeting?

Accepted Answer

A)  It's an inflexible rule that requires the central bank to always achieve a specified inflation rate. 
B)  It allows monetary policy to focus on inflation and inflation forecasts except in the case of severe recession. 
C)  It allows the central bank the flexibility of setting different inflation targets each year. 
D)  It requires central banks to target current inflation rather than inflation forecasts. 
A)  It's an inflexible rule that requires the central bank to always achieve a specified inflation rate. 
B)  It allows monetary policy to focus on inflation and inflation forecasts except in the case of severe recession. 
C)  It allows the central bank the flexibility of setting different inflation targets each year. 
D)  It requires central banks to target current inflation rather than inflation forecasts.

Question 7

In 2016,savings rates in Japan,Germany,Denmark,Sweden,and Switzerland

Accepted Answer

A)  were at their lowest level since 1995, indicating that negative interest rates were not increasing consumer spending. 
B)  were at their lowest level since 1995, indicating that negative interest rates were, indeed, increasing consumer spending. 
C)  were at their highest level since 1995, indicating that negative interest rates were not increasing consumer spending. 
D)  were at their highest level since 1995, indicating that negative interest rates were, indeed, increasing consumer spending. 
A)  were at their lowest level since 1995, indicating that negative interest rates were not increasing consumer spending. 
B)  were at their lowest level since 1995, indicating that negative interest rates were, indeed, increasing consumer spending. 
C)  were at their highest level since 1995, indicating that negative interest rates were not increasing consumer spending. 
D)  were at their highest level since 1995, indicating that negative interest rates were, indeed, increasing consumer spending.

Question 8

When the Fed raised its target for the federal funds rate in 2015,it set the interest rate it pays on excess reserves at

Accepted Answer

A)  0%. 
B)  0.25%. 
C)  0.50%. 
D)  1.25%. 
A)  0%. 
B)  0.25%. 
C)  0.50%. 
D)  1.25%.

Question 9

The third round of quantitative easing,announced in September 2012,was focused on purchases of

Accepted Answer

A)  short-term Treasury bills. 
B)  long-term Treasury notes. 
C)  long-term Treasury notes and sales of short-term Treasury bills. 
D)  mortgage-backed securities. 
A)  short-term Treasury bills. 
B)  long-term Treasury notes. 
C)  long-term Treasury notes and sales of short-term Treasury bills. 
D)  mortgage-backed securities.

Question 10

During and after the financial crisis of 2007-2009,the Fed greatly increased the supply of reserves through three rounds of quantitative easing by

Accepted Answer

A)  sales of both long-term Treasury securities and mortgage-backed securities. 
B)  sales of long-term Treasury securities and purchases of mortgage-backed securities. 
C)  purchases of both long-term Treasury securities and mortgage-backed securities. 
D)  purchases of long-term Treasury securities and sales of mortgage-backed securities. 
A)  sales of both long-term Treasury securities and mortgage-backed securities. 
B)  sales of long-term Treasury securities and purchases of mortgage-backed securities. 
C)  purchases of both long-term Treasury securities and mortgage-backed securities. 
D)  purchases of long-term Treasury securities and sales of mortgage-backed securities.

Question 11

Intermediate targets are

Accepted Answer

A)  interim goals set on the way to fully achieving policy goals. 
B)  targets for policy goals that are of secondary importance. 
C)  targets the Fed hopes to achieve by June of each year. 
D)  financial variables, such as interest rates or monetary aggregates, the Fed believes will help it to achieve policy goals. 
A)  interim goals set on the way to fully achieving policy goals. 
B)  targets for policy goals that are of secondary importance. 
C)  targets the Fed hopes to achieve by June of each year. 
D)  financial variables, such as interest rates or monetary aggregates, the Fed believes will help it to achieve policy goals.

Question 12

Which types of unemployment still occur even when the economy is considered to be operating at full employment?

Accepted Answer

At full employment,t

Question 13

As a result of an open market purchase,bank reserves

Accepted Answer

A)  rise and interest rates fall. 
B)  fall and interest rates rise. 
C)  and interest rates both rise. 
D)  and interest rates both fall. 
A)  rise and interest rates fall. 
B)  fall and interest rates rise. 
C)  and interest rates both rise. 
D)  and interest rates both fall.

Question 14

The inflation gap can best be described as

Accepted Answer

A)  the percentage difference between GDP and its potential. 
B)  the difference between inflation and its target. 
C)  the change in the inflation rate from one year to the next. 
D)  the difference between the inflation rate and the average inflation rate of that of the nations with the 3 lowest inflation rates. 
A)  the percentage difference between GDP and its potential. 
B)  the difference between inflation and its target. 
C)  the change in the inflation rate from one year to the next. 
D)  the difference between the inflation rate and the average inflation rate of that of the nations with the 3 lowest inflation rates.

Question 15

The Fed's monetary policy tools

Accepted Answer

A)  have proven to be of little value in helping the Fed to achieve its monetary policy goals. 
B)  have allowed the Fed to achieve its monetary policy goals directly. 
C)  have allowed the Fed to achieve its monetary policy goals indirectly. 
D)  are no longer as effective in achieving its monetary policy goals, due to restrictive legislation passed by Congress in the 1990s. 
A)  have proven to be of little value in helping the Fed to achieve its monetary policy goals. 
B)  have allowed the Fed to achieve its monetary policy goals directly. 
C)  have allowed the Fed to achieve its monetary policy goals indirectly. 
D)  are no longer as effective in achieving its monetary policy goals, due to restrictive legislation passed by Congress in the 1990s.

Question 16

Which of the following statements concerning seasonal credit is TRUE?

Accepted Answer

A)  It tends to have a lower interest rate than federal funds. 
B)  It has become increasingly more important in recent years. 
C)  Only firms receiving secondary credit are eligible to receive seasonal credit. 
D)  Improvements in credit markets have reduced the need for a seasonal credit facility. 
A)  It tends to have a lower interest rate than federal funds. 
B)  It has become increasingly more important in recent years. 
C)  Only firms receiving secondary credit are eligible to receive seasonal credit. 
D)  Improvements in credit markets have reduced the need for a seasonal credit facility.

Question 17

The assumption that reserves are scarce

Accepted Answer

A)  was accurate prior to the financial crisis of 2007-2009 but not following the crisis. 
B)  was accurate following the financial crisis of 2007-2009 but not prior to the crisis. 
C)  was accurate prior to and following the financial crisis of 2007-2009. 
D)  was not accurate prior to or following the financial crisis of 2007-2009. 
A)  was accurate prior to the financial crisis of 2007-2009 but not following the crisis. 
B)  was accurate following the financial crisis of 2007-2009 but not prior to the crisis. 
C)  was accurate prior to and following the financial crisis of 2007-2009. 
D)  was not accurate prior to or following the financial crisis of 2007-2009.

Question 18

All of the following arguments are presented in favor of inflation targeting EXCEPT

Accepted Answer

A)  it would draw attention to what the central bank can achieve in practice. 
B)  it would provide an anchor for inflationary expectations. 
C)  it would promote accountability by providing a yardstick by which policy can be measured. 
D)  it would reduce the lags inherent in monetary policy. 
A)  it would draw attention to what the central bank can achieve in practice. 
B)  it would provide an anchor for inflationary expectations. 
C)  it would promote accountability by providing a yardstick by which policy can be measured. 
D)  it would reduce the lags inherent in monetary policy.

Question 19

Inflation is an economic problem because it

Accepted Answer

A)  leads inevitably to unemployment. 
B)  makes prices less useful as signals for resource allocation. 
C)  leads to recession. 
D)  results in rapid increases in the money supply. 
A)  leads inevitably to unemployment. 
B)  makes prices less useful as signals for resource allocation. 
C)  leads to recession. 
D)  results in rapid increases in the money supply.

Question 20

What new policy tools for controlling reserve balances did the Fed introduce during the Financial Crisis of 2007-2009?

Accepted Answer

The Fed began to pay interest on reserve

The information lag facing the Fed is

The bursting of the dot-com bubble contributed to the

What is quantitative easing? What was the Fed's objective in implementing quantitative easing?

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

Reserve requirements are changed

Which of the following best describes a policy of inflation targeting?

In 2016,savings rates in Japan,Germany,Denmark,Sweden,and Switzerland

When the Fed raised its target for the federal funds rate in 2015,it set the interest rate it pays on excess reserves at

The third round of quantitative easing,announced in September 2012,was focused on purchases of

During and after the financial crisis of 2007-2009,the Fed greatly increased the supply of reserves through three rounds of quantitative easing by

Intermediate targets are

Which types of unemployment still occur even when the economy is considered to be operating at full employment?

As a result of an open market purchase,bank reserves

The inflation gap can best be described as

The Fed's monetary policy tools

Which of the following statements concerning seasonal credit is TRUE?

The assumption that reserves are scarce

All of the following arguments are presented in favor of inflation targeting EXCEPT

Inflation is an economic problem because it

What new policy tools for controlling reserve balances did the Fed introduce during the Financial Crisis of 2007-2009?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 15: Monetary Policy

The information lag facing the Fed is

The bursting of the dot-com bubble contributed to the

What is quantitative easing? What was the Fed's objective in implementing quantitative easing?

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

Reserve requirements are changed

Which of the following best describes a policy of inflation targeting?

In 2016,savings rates in Japan,Germany,Denmark,Sweden,and Switzerland

When the Fed raised its target for the federal funds rate in 2015,it set the interest rate it pays on excess reserves at

The third round of quantitative easing,announced in September 2012,was focused on purchases of

During and after the financial crisis of 2007-2009,the Fed greatly increased the supply of reserves through three rounds of quantitative easing by

Intermediate targets are

Which types of unemployment still occur even when the economy is considered to be operating at full employment?

As a result of an open market purchase,bank reserves

The inflation gap can best be described as

The Fed's monetary policy tools

Which of the following statements concerning seasonal credit is TRUE?

The assumption that reserves are scarce

All of the following arguments are presented in favor of inflation targeting EXCEPT

Inflation is an economic problem because it

What new policy tools for controlling reserve balances did the Fed introduce during the Financial Crisis of 2007-2009?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters