Question 1

Which of the following is an operating target?

Accepted Answer

A)  M1 
B)  M2 
C)  nonborrowed reserves 
D)  the inflation rate 
A)  M1 
B)  M2 
C)  nonborrowed reserves 
D)  the inflation rate

Question 2

Interest rate fluctuations

Accepted Answer

A)  are usually not considered to be of much importance and are largely ignored by the Fed. 
B)  have the paradoxical effect of increasing the rate of economic growth. 
C)  make it difficult for households and firms to plan for the future. 
D)  have largely been eliminated by the Fed during the past two decades. 
A)  are usually not considered to be of much importance and are largely ignored by the Fed. 
B)  have the paradoxical effect of increasing the rate of economic growth. 
C)  make it difficult for households and firms to plan for the future. 
D)  have largely been eliminated by the Fed during the past two decades.

Question 3

A consequence of the impact lag is that the Fed

Accepted Answer

A)  may not know the impact of a change in policy. 
B)  might not be able to correct a mistaken policy soon enough. 
C)  may not have current information about the state of the economy. 
D)  may see the impact of a change in policy on inflation, but not economic growth. 
A)  may not know the impact of a change in policy. 
B)  might not be able to correct a mistaken policy soon enough. 
C)  may not have current information about the state of the economy. 
D)  may see the impact of a change in policy on inflation, but not economic growth.

Question 4

All of the following central banks took action to stimulate their economies following the 2007-2009 financial crisis and recession by implementing negative interest rates EXCEPT

Accepted Answer

A)  the U.S. Federal Reserve. 
B)  the European Central Bank. 
C)  the Swiss National Bank. 
D)  Denmark's Nationalbank. 
A)  the U.S. Federal Reserve. 
B)  the European Central Bank. 
C)  the Swiss National Bank. 
D)  Denmark's Nationalbank.

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Open market purchases are expansionary and open market sales are contractionary. 
B)  Open market purchases are contractionary and open market sales are expansionary. 
C)  Both open market purchases and open market sales are expansionary. 
D)  Both open market purchases and open market sales are contractionary. 
A)  Open market purchases are expansionary and open market sales are contractionary. 
B)  Open market purchases are contractionary and open market sales are expansionary. 
C)  Both open market purchases and open market sales are expansionary. 
D)  Both open market purchases and open market sales are contractionary.

Question 6

In the United States from 1981 to 1983,the money supply ________ and the inflation rate ________.

Accepted Answer

A)  increased; increased 
B)  increased; decreased 
C)  decreased; increased 
D)  decreased; decreased 
A)  increased; increased 
B)  increased; decreased 
C)  decreased; increased 
D)  decreased; decreased

Question 7

Which of the following countries experienced hyperinflation during the 1920s?

Accepted Answer

A)  The United States 
B)  Canada 
C)  Germany 
D)  England 
A)  The United States 
B)  Canada 
C)  Germany 
D)  England

Question 8

How can the Fed reduce the implicit tax on banks resulting from reserve requirements?

Accepted Answer

A)  lowering the discount rate 
B)  paying interest on reserves 
C)  reducing the federal funds rate 
D)  increasing the federal funds rate 
A)  lowering the discount rate 
B)  paying interest on reserves 
C)  reducing the federal funds rate 
D)  increasing the federal funds rate

Question 9

The original Federal Reserve Act

Accepted Answer

A)  specified open market operations as the Fed's main policy tool. 
B)  specified open market operations as one of several Fed policy tools. 
C)  specified that open market operations be employed by the Fed only in circumstances where discount loans were ineffective. 
D)  did not specifically mention open market operations. 
A)  specified open market operations as the Fed's main policy tool. 
B)  specified open market operations as one of several Fed policy tools. 
C)  specified that open market operations be employed by the Fed only in circumstances where discount loans were ineffective. 
D)  did not specifically mention open market operations.

Question 10

The benchmark default-free interest rate of the financial system is generally considered to be

Accepted Answer

A)  the federal funds rate. 
B)  the interest rate on the 10-year Treasury note. 
C)  the discount rate. 
D)  the 30-year fixed rate mortgage. 
A)  the federal funds rate. 
B)  the interest rate on the 10-year Treasury note. 
C)  the discount rate. 
D)  the 30-year fixed rate mortgage.

Question 11

The impact lag facing the Fed is

Accepted Answer

A)  the delay before open market operations are able to affect the monetary base. 
B)  the delay before the Fed's announcement of a new policy has an impact on the decisions of the public. 
C)  the time required for monetary policy changes to affect output, employment, and prices. 
D)  the delay before the impact of a recession on output and prices becomes clear to the Fed. 
A)  the delay before open market operations are able to affect the monetary base. 
B)  the delay before the Fed's announcement of a new policy has an impact on the decisions of the public. 
C)  the time required for monetary policy changes to affect output, employment, and prices. 
D)  the delay before the impact of a recession on output and prices becomes clear to the Fed.

Question 12

An important problem facing the Fed is that

Accepted Answer

A)  the goals for economic growth and price stability may conflict in the short run. 
B)  it lost effective control over the monetary base. 
C)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with Congress. 
D)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with the president. 
A)  the goals for economic growth and price stability may conflict in the short run. 
B)  it lost effective control over the monetary base. 
C)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with Congress. 
D)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with the president.

Question 13

What was the goal of Operation Twist?

Accepted Answer

A)  to reduce long-term interest rates and increase short-term interest rates 
B)  to reduce short-term interest rates and increase long-term interest rates 
C)  to reduce both short-term and long-term interest rates 
D)  to increase both short-term and long-term interest rates 
A)  to reduce long-term interest rates and increase short-term interest rates 
B)  to reduce short-term interest rates and increase long-term interest rates 
C)  to reduce both short-term and long-term interest rates 
D)  to increase both short-term and long-term interest rates

Question 14

Describe the three types of unemployment?

Accepted Answer

The three types of unemployment are fric

Question 15

Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel.Sally Jones is considered by economists to be

Accepted Answer

A)  naturally unemployed. 
B)  cyclically unemployed. 
C)  structurally unemployed. 
D)  frictionally unemployed. 
A)  naturally unemployed. 
B)  cyclically unemployed. 
C)  structurally unemployed. 
D)  frictionally unemployed.

Question 16

The Open Market Trading Desk is

Accepted Answer

A)  another name for the Federal Open Market Committee. 
B)  an organization of private traders in government securities. 
C)  the area on the floor of the New York Stock Exchange set aside for bond trading. 
D)  linked electronically to a group of private securities firms that the Fed has selected to participate in open market operations. 
A)  another name for the Federal Open Market Committee. 
B)  an organization of private traders in government securities. 
C)  the area on the floor of the New York Stock Exchange set aside for bond trading. 
D)  linked electronically to a group of private securities firms that the Fed has selected to participate in open market operations.

Question 17

When financial markets and institutions are NOT efficient in matching savers and borrowers

Accepted Answer

A)  interest rates fall, which discourages saving even further. 
B)  interest rates fall, which discourages investment even further. 
C)  resources are lost. 
D)  investment rises. 
A)  interest rates fall, which discourages saving even further. 
B)  interest rates fall, which discourages investment even further. 
C)  resources are lost. 
D)  investment rises.

Question 18

Under which chair did the Fed implement the policy of inflation targeting?

Accepted Answer

A)  Volcker 
B)  Bernanke 
C)  Greenspan 
D)  Geithner 
A)  Volcker 
B)  Bernanke 
C)  Greenspan 
D)  Geithner

Question 19

Suppose banks incur heavy losses and become more cautious,increasing their demand for reserve.Make use of a graph of the federal funds market to show how the Fed can use open market operations to maintain the same federal funds rate.

Accepted Answer

The Fed will conduct open mark

Question 20

Which of the following statements is correct?

Accepted Answer

A)  Dynamic open market operations are carried out to offset fluctuations in the monetary base. 
B)  Defensive open market operations are carried out to change monetary policy. 
C)  The volume of defensive open market operations is much greater than the volume of dynamic open market operations. 
D)  Defensive open market operations are usually carried out through outright purchases or sales. 
A)  Dynamic open market operations are carried out to offset fluctuations in the monetary base. 
B)  Defensive open market operations are carried out to change monetary policy. 
C)  The volume of defensive open market operations is much greater than the volume of dynamic open market operations. 
D)  Defensive open market operations are usually carried out through outright purchases or sales.

Which of the following is an operating target?

Interest rate fluctuations

A consequence of the impact lag is that the Fed

All of the following central banks took action to stimulate their economies following the 2007-2009 financial crisis and recession by implementing negative interest rates EXCEPT

Which of the following statements is correct?

In the United States from 1981 to 1983,the money supply and the inflation rate .

Which of the following countries experienced hyperinflation during the 1920s?

How can the Fed reduce the implicit tax on banks resulting from reserve requirements?

The original Federal Reserve Act

The benchmark default-free interest rate of the financial system is generally considered to be

The impact lag facing the Fed is

An important problem facing the Fed is that

What was the goal of Operation Twist?

Describe the three types of unemployment?

Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel.Sally Jones is considered by economists to be

The Open Market Trading Desk is

When financial markets and institutions are NOT efficient in matching savers and borrowers

Under which chair did the Fed implement the policy of inflation targeting?

Suppose banks incur heavy losses and become more cautious,increasing their demand for reserve.Make use of a graph of the federal funds market to show how the Fed can use open market operations to maintain the same federal funds rate.

Which of the following statements is correct?

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

Which of the following is an operating target?

Interest rate fluctuations

A consequence of the impact lag is that the Fed

All of the following central banks took action to stimulate their economies following the 2007-2009 financial crisis and recession by implementing negative interest rates EXCEPT

Which of the following statements is correct?

In the United States from 1981 to 1983,the money supply ________ and the inflation rate ________.

Which of the following countries experienced hyperinflation during the 1920s?

How can the Fed reduce the implicit tax on banks resulting from reserve requirements?

The original Federal Reserve Act

The benchmark default-free interest rate of the financial system is generally considered to be

The impact lag facing the Fed is

An important problem facing the Fed is that

What was the goal of Operation Twist?

Describe the three types of unemployment?

Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel.Sally Jones is considered by economists to be

The Open Market Trading Desk is

When financial markets and institutions are NOT efficient in matching savers and borrowers

Under which chair did the Fed implement the policy of inflation targeting?

Suppose banks incur heavy losses and become more cautious,increasing their demand for reserve.Make use of a graph of the federal funds market to show how the Fed can use open market operations to maintain the same federal funds rate.

Which of the following statements is correct?

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

In the United States from 1981 to 1983,the money supply and the inflation rate .