Question 1

All of the following are associated with rising inflation EXCEPT

Accepted Answer

A)  income redistribution. 
B)  a steady decrease in interest rates. 
C)  firms hesitating to enter into long-term contracts with suppliers. 
D)  families having trouble deciding how much to save for retirement. 
A)  income redistribution. 
B)  a steady decrease in interest rates. 
C)  firms hesitating to enter into long-term contracts with suppliers. 
D)  families having trouble deciding how much to save for retirement.

Question 2

Which of the following statements is correct?

Accepted Answer

A)  The discount rate is generally above the federal funds rate. 
B)  The discount rate is generally below the federal funds rate. 
C)  The discount rate is generally equal to the federal funds rate. 
D)  There is no general pattern to the relation between the discount rate and the federal funds rate. 
A)  The discount rate is generally above the federal funds rate. 
B)  The discount rate is generally below the federal funds rate. 
C)  The discount rate is generally equal to the federal funds rate. 
D)  There is no general pattern to the relation between the discount rate and the federal funds rate.

Question 3

High employment spurs economic growth because high employment

Accepted Answer

A)  usually reduces inflation. 
B)  discourages foreign imports. 
C)  often leads to a high birth rate. 
D)  often leads to high rates of investment. 
A)  usually reduces inflation. 
B)  discourages foreign imports. 
C)  often leads to a high birth rate. 
D)  often leads to high rates of investment.

Question 4

Because of the breakdown in the relationship between the growth of the money supply and inflation,since 1993,the Fed

Accepted Answer

A)  no longer announces targets for M1 or M2. 
B)  has announced targets for M1 or M2. 
C)  has announced a target for M1 instead of M2. 
D)  has announced a target for M2 instead of M1. 
A)  no longer announces targets for M1 or M2. 
B)  has announced targets for M1 or M2. 
C)  has announced a target for M1 instead of M2. 
D)  has announced a target for M2 instead of M1.

Question 5

The policy directive from the FOMC is carried out by

Accepted Answer

A)  the presidents of the district banks. 
B)  the presidents of commercial banks that are members of the Federal Reserve System. 
C)  the account manager at the Federal Reserve Bank of New York. 
D)  private dealers in the bond market. 
A)  the presidents of the district banks. 
B)  the presidents of commercial banks that are members of the Federal Reserve System. 
C)  the account manager at the Federal Reserve Bank of New York. 
D)  private dealers in the bond market.

Question 6

The Fed's inability to instantaneously observe changes in inflation and economic growth result in

Accepted Answer

A)  information lag. 
B)  impact lag. 
C)  policy lag. 
D)  jet lag. 
A)  information lag. 
B)  impact lag. 
C)  policy lag. 
D)  jet lag.

Question 7

Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%.Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this.

Accepted Answer

The Fed will conduct open mark

Question 8

According to the Taylor rule,what should the federal funds rate target be if inflation is 5%,the target rate of inflation is 2%,the equilibrium real federal funds rate is 2%,full-employment real GDP is $9 trillion,and current real GDP is $8.55 trillion?

Accepted Answer

Fed funds rate targe

Question 9

What is the difference between defensive and dynamic open market operations?

Accepted Answer

Dynamic open market operations are inten

Question 10

Which of the following is an accurate description of the steps by which the FOMC causes the actual federal funds rate to rise into its target range when it votes to raise the federal funds rate target?

Accepted Answer

A)  ON RRP is increased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market AND are paid interest on their deposits with the Fed → this pushes the federal funds rate to the top of the target range → federal funds rate rises into this new range. 
B)  ON RRP is decreased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market AND are paid interest on their deposits with the Fed → this pushes the federal funds rate to the top of the target range → federal funds rate rises into this new range. 
C)  ON RRP is increased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market BUT ARE NOT paid interest on their deposits with the Fed → this keeps the federal funds rate above the bottom of the target range → federal funds rate rises into this new range. 
D)  ON RRP is decreased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market BUT ARE NOT paid interest on their deposits with the Fed → this keeps the federal funds rate above the bottom of the target range → federal funds rate rises into this new range. 
A)  ON RRP is increased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market AND are paid interest on their deposits with the Fed → this pushes the federal funds rate to the top of the target range → federal funds rate rises into this new range. 
B)  ON RRP is decreased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market AND are paid interest on their deposits with the Fed → this pushes the federal funds rate to the top of the target range → federal funds rate rises into this new range. 
C)  ON RRP is increased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market BUT ARE NOT paid interest on their deposits with the Fed → this keeps the federal funds rate above the bottom of the target range → federal funds rate rises into this new range. 
D)  ON RRP is decreased → this affects certain nonbank financial institutions that can borrow and lend in the federal funds market BUT ARE NOT paid interest on their deposits with the Fed → this keeps the federal funds rate above the bottom of the target range → federal funds rate rises into this new range.

Question 11

Open market operations

Accepted Answer

A)  lack flexibility because only very small purchases or sales may be carried out in any given month. 
B)  lack flexibility because open market purchases cannot easily be offset by subsequent open market sales. 
C)  are more flexible than other traditional policy tools. 
D)  may be carried out only on the third Friday of each month. 
A)  lack flexibility because only very small purchases or sales may be carried out in any given month. 
B)  lack flexibility because open market purchases cannot easily be offset by subsequent open market sales. 
C)  are more flexible than other traditional policy tools. 
D)  may be carried out only on the third Friday of each month.

Question 12

Temporary,short-term discount loans to banks in areas in which agriculture and tourism are important are known as

Accepted Answer

A)  primary credit. 
B)  secondary credit. 
C)  seasonal credit. 
D)  repo loans. 
A)  primary credit. 
B)  secondary credit. 
C)  seasonal credit. 
D)  repo loans.

Question 13

The discount window is

Accepted Answer

A)  another name for the discount rate. 
B)  the means by which the Fed makes discount loans to banks. 
C)  the spread between the discount rate and the T-bill rate. 
D)  the period each month during which banks are allowed to apply for discount loans. 
A)  another name for the discount rate. 
B)  the means by which the Fed makes discount loans to banks. 
C)  the spread between the discount rate and the T-bill rate. 
D)  the period each month during which banks are allowed to apply for discount loans.

Question 14

In December 2008,the FOMC cut its target for the federal funds rate from 1% to a range from 0% to 0.25%,and it remained at this level for

Accepted Answer

A)  2 years. 
B)  3 years. 
C)  5 1/2 years. 
D)  7 years. 
A)  2 years. 
B)  3 years. 
C)  5 1/2 years. 
D)  7 years.

Question 15

Congress established the FOMC because

Accepted Answer

A)  a group was needed to set reserve requirements for member banks. 
B)  of a lack of coordination among district banks in carrying out open market operations. 
C)  Congress was attempting to expand its influence within the Federal Reserve System. 
D)  a group was needed to coordinate the setting of discount rates by the district banks. 
A)  a group was needed to set reserve requirements for member banks. 
B)  of a lack of coordination among district banks in carrying out open market operations. 
C)  Congress was attempting to expand its influence within the Federal Reserve System. 
D)  a group was needed to coordinate the setting of discount rates by the district banks.

Question 16

When economists and policymakers refer to the Fed's dual mandate,they are referring to

Accepted Answer

A)  price and exchange rate stability. 
B)  price stability and maximum employment. 
C)  moderate long-term interest rates and maximum employment. 
D)  price stability and moderate long-term interest rates. 
A)  price and exchange rate stability. 
B)  price stability and maximum employment. 
C)  moderate long-term interest rates and maximum employment. 
D)  price stability and moderate long-term interest rates.

Question 17

The unemployment that is caused by changes in the economy,such as shifts in manufacturing techniques,increased use of computers and electronic machines,and increases in the production of services instead of goods,is called

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  natural unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  natural unemployment.

Question 18

Discount loans intended for banks that are NOT financially healthy are called

Accepted Answer

A)  primary credit. 
B)  secondary credit. 
C)  seasonal credit. 
D)  repo loans. 
A)  primary credit. 
B)  secondary credit. 
C)  seasonal credit. 
D)  repo loans.

Question 19

In a matched sale-purchase transaction,the Fed

Accepted Answer

A)  buys securities from a dealer and the dealer agrees to buy them back. 
B)  sells securities to a dealer and the dealer agrees to sell them back. 
C)  buys securities from one dealer and sells the same dollar amount of securities to another dealer. 
D)  sells securities to one dealer and buys the same dollar amount of securities from another dealer. 
A)  buys securities from a dealer and the dealer agrees to buy them back. 
B)  sells securities to a dealer and the dealer agrees to sell them back. 
C)  buys securities from one dealer and sells the same dollar amount of securities to another dealer. 
D)  sells securities to one dealer and buys the same dollar amount of securities from another dealer.

Question 20

When did the Fed first begin to use open market operations as a policy tool?

Accepted Answer

A)  the 1920s 
B)  the 1930s 
C)  the 1960s 
D)  the 1980s 
A)  the 1920s 
B)  the 1930s 
C)  the 1960s 
D)  the 1980s

All of the following are associated with rising inflation EXCEPT

Which of the following statements is correct?

High employment spurs economic growth because high employment

Because of the breakdown in the relationship between the growth of the money supply and inflation,since 1993,the Fed

The policy directive from the FOMC is carried out by

The Fed's inability to instantaneously observe changes in inflation and economic growth result in

Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%.Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this.

According to the Taylor rule,what should the federal funds rate target be if inflation is 5%,the target rate of inflation is 2%,the equilibrium real federal funds rate is 2%,full-employment real GDP is $9 trillion,and current real GDP is $8.55 trillion?

What is the difference between defensive and dynamic open market operations?

Which of the following is an accurate description of the steps by which the FOMC causes the actual federal funds rate to rise into its target range when it votes to raise the federal funds rate target?

Open market operations

Temporary,short-term discount loans to banks in areas in which agriculture and tourism are important are known as

The discount window is

In December 2008,the FOMC cut its target for the federal funds rate from 1% to a range from 0% to 0.25%,and it remained at this level for

Congress established the FOMC because

When economists and policymakers refer to the Fed's dual mandate,they are referring to

The unemployment that is caused by changes in the economy,such as shifts in manufacturing techniques,increased use of computers and electronic machines,and increases in the production of services instead of goods,is called

Discount loans intended for banks that are NOT financially healthy are called

In a matched sale-purchase transaction,the Fed

When did the Fed first begin to use open market operations as a policy tool?

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

All of the following are associated with rising inflation EXCEPT

Which of the following statements is correct?

High employment spurs economic growth because high employment

Because of the breakdown in the relationship between the growth of the money supply and inflation,since 1993,the Fed

The policy directive from the FOMC is carried out by

The Fed's inability to instantaneously observe changes in inflation and economic growth result in

Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%.Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this.

According to the Taylor rule,what should the federal funds rate target be if inflation is 5%,the target rate of inflation is 2%,the equilibrium real federal funds rate is 2%,full-employment real GDP is $9 trillion,and current real GDP is $8.55 trillion?

What is the difference between defensive and dynamic open market operations?

Which of the following is an accurate description of the steps by which the FOMC causes the actual federal funds rate to rise into its target range when it votes to raise the federal funds rate target?

Open market operations

Temporary,short-term discount loans to banks in areas in which agriculture and tourism are important are known as

The discount window is

In December 2008,the FOMC cut its target for the federal funds rate from 1% to a range from 0% to 0.25%,and it remained at this level for

Congress established the FOMC because

When economists and policymakers refer to the Fed's dual mandate,they are referring to

The unemployment that is caused by changes in the economy,such as shifts in manufacturing techniques,increased use of computers and electronic machines,and increases in the production of services instead of goods,is called

Discount loans intended for banks that are NOT financially healthy are called

In a matched sale-purchase transaction,the Fed

When did the Fed first begin to use open market operations as a policy tool?

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