Question 1

One positive aspect of inflation is its impact on the allocation of resources.

Accepted Answer

A) True 
 B)False

Question 2

The Swiss National Bank uses currency swaps with foreign central banks to carry out its monetary policy goals.

Accepted Answer

A) True 
 B)False

Question 3

The central bank that uses U.S. dollar-euro currency swaps to influence economic conditions in its home country is the:

Accepted Answer

A)  Bank of Japan 
B)  Bank of France 
C)  Bank of Mexico 
D)  Bank of Canada 
E)  None of the above 
A)  Bank of Japan 
B)  Bank of France 
C)  Bank of Mexico 
D)  Bank of Canada 
E)  None of the above

Question 4

The federal funds rate reflects the "price"
of reserves in the banking system.

Accepted Answer

A) True 
 B)False

Question 5

Why do you think reserve requirements and discount rates are being phased out as policy tools by many central banks around the world? Are reserve requirements and the discount rate a general credit control or a selective credit control? Why?

Accepted Answer

Early in the Fed's history, it was belie

Question 6

One of the limitations of monetary policy is continuing changes in the structure of the economy itself which disturb the linkages between monetary variables and economic conditions.

Accepted Answer

A) True 
 B)False

Question 7

In problem 3 above suppose the supply of nonborrowed reserves falls to $490 million due to open-market sales by the central bank. Holding all other factors constant what happens to the equilibrium Federal funds interest rate? If nonborrowed reserves drop to $490 million while borrowed reserves increase to $56 million, all else held equal, what happens to the equilibrium funds rate?

Accepted Answer

According to the above formula: $490 mil

Question 8

The manager of the Trading Desk that carries out open market operations on behalf of the Federal Reserve System is a vice president at the Federal Reserve Bank of New York.

Accepted Answer

A) True 
 B)False

Question 9

Changes in the rate of money supply growth appear to precede changes in economic activity.

Accepted Answer

A) True 
 B)False

Question 10

How and why does a depository institution borrow from the central bank? Explain what happens when a central bank changes its discount or lending rate. What are the principal advantages and disadvantages of the discount policy tool?

Accepted Answer

Depository institutions borrow short-ter

Question 11

In the 1990s and early 21st century Japan was struggling with deflation and used a policy establishing a zero interest rate and injecting reserves into the banking system at a rapid pace, which is referred to as

Accepted Answer

A)  Free money 
B)  Free interest 
C)  Quantitative easing 
D)  A common contemporary practice 
E)  None of the above 
A)  Free money 
B)  Free interest 
C)  Quantitative easing 
D)  A common contemporary practice 
E)  None of the above

Question 12

How does the reserve requirement tool affect the ability of deposit-type financial institutions to create money? What are the principal advantages and disadvantages of the reserve requirement tool?

Accepted Answer

The reserve requirement (the Fed's most

Question 13

The term "fiscal policy"
refers to the impact of Federal Reserve open market operations upon the size of the government's debt.

Accepted Answer

A) True 
 B)False

Question 14

The maximum loan value for marginable stocks, convertible bonds and short sales are specified under rules set out in the Federal Reserve Regulations G, T and U.

Accepted Answer

A) True 
 B)False

Question 15

What is interest-rate targeting? Which interest rate does the Federal Reserve focus upon in its conduct of monetary policy?

Accepted Answer

In recent years, the Federal Reserve has

Question 16

If the Federal Reserve wishes to put upward pressure on market interest rates, what would it be most likely to do? How would it proceed to push the Federal funds rate in an upward direction? How would it lower the funds rate?

Accepted Answer

The main policy tool used by the Federal

Question 17

The majority of loans granted through the Fed's discount window are secured by:

Accepted Answer

A)  Signature loans 
B)  Commercial paper 
C)  Municipal bonds 
D)  Federal fund loans 
E)  Repurchase agreements 
F) U.S. Government securities
G) None of the above 
A)  Signature loans 
B)  Commercial paper 
C)  Municipal bonds 
D)  Federal fund loans 
E)  Repurchase agreements 
F) U.S. Government securities
G) None of the above

Question 18

Why are open market operations increasingly the most popular and frequently used monetary policy tool?
What are the principal effects of open market operations on the financial system?

Accepted Answer

Open market operations are flexible and

Question 19

Explain the difference between an RP and a straight (or outright) open market transaction. Why is each used? What is a runoff? An agency operation?

Accepted Answer

A straight transaction refers to the sal

Question 20

Nearly all central banks appear to work through:

Accepted Answer

A)  Changes in the total reserves available to the banking system 
B)  Changes in the Federal funds rate 
C)  Changes in prime bank loan rates 
D)  Changes in borrowed reserves 
E)  None of the above 
A)  Changes in the total reserves available to the banking system 
B)  Changes in the Federal funds rate 
C)  Changes in prime bank loan rates 
D)  Changes in borrowed reserves 
E)  None of the above

Exam 13: The Tools and Goals of Central Bank Monetary Policy

One positive aspect of inflation is its impact on the allocation of resources.

The Swiss National Bank uses currency swaps with foreign central banks to carry out its monetary policy goals.

The central bank that uses U.S. dollar-euro currency swaps to influence economic conditions in its home country is the:

The federal funds rate reflects the "price" of reserves in the banking system.

Why do you think reserve requirements and discount rates are being phased out as policy tools by many central banks around the world? Are reserve requirements and the discount rate a general credit control or a selective credit control? Why?

One of the limitations of monetary policy is continuing changes in the structure of the economy itself which disturb the linkages between monetary variables and economic conditions.

The manager of the Trading Desk that carries out open market operations on behalf of the Federal Reserve System is a vice president at the Federal Reserve Bank of New York.

Changes in the rate of money supply growth appear to precede changes in economic activity.

How and why does a depository institution borrow from the central bank? Explain what happens when a central bank changes its discount or lending rate. What are the principal advantages and disadvantages of the discount policy tool?

In the 1990s and early 21st century Japan was struggling with deflation and used a policy establishing a zero interest rate and injecting reserves into the banking system at a rapid pace, which is referred to as

How does the reserve requirement tool affect the ability of deposit-type financial institutions to create money? What are the principal advantages and disadvantages of the reserve requirement tool?

The term "fiscal policy" refers to the impact of Federal Reserve open market operations upon the size of the government's debt.

The maximum loan value for marginable stocks, convertible bonds and short sales are specified under rules set out in the Federal Reserve Regulations G, T and U.

What is interest-rate targeting? Which interest rate does the Federal Reserve focus upon in its conduct of monetary policy?

If the Federal Reserve wishes to put upward pressure on market interest rates, what would it be most likely to do? How would it proceed to push the Federal funds rate in an upward direction? How would it lower the funds rate?

The majority of loans granted through the Fed's discount window are secured by:

Why are open market operations increasingly the most popular and frequently used monetary policy tool? What are the principal effects of open market operations on the financial system?

Explain the difference between an RP and a straight (or outright) open market transaction. Why is each used? What is a runoff? An agency operation?

Nearly all central banks appear to work through:

Functions and Roles of the Financial System in the Global Economy

Financial Assets, Money, Financial Transactions, and Financial Institutions

The Financial Information Marketplace

The Future of the Financial System and the Money and Capital Markets

The Determinants of Interest Rates: Competing Ideas

Measuring and Calculating Interest Rates and Financial Asset Prices

Inflation and Deflation, Yield Curves, and Duration: Impact on Interest Rates and Asset Prices

The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors

Interest-Rate Forecasting and Hedging: Swaps, Financial Futures, and Options

Introduction to the Money Market and the Roles Played by Governments and Security Dealers

Commercial Banks, Major Corporations, and Federal Credit Agencies in the Money Market

Roles and Services of the Federal Reserve and Other Central Banks Around the World

The Commercial Banking Industry: Structure, Products, and Management

Nonbank Thrift Institutions: Savings and Loans, Savings Banks, Credit Unions, and Money Market Funds

Mutual Funds, Insurance Companies, Investment Banks, and Other Financial Firms

Regulation of the Financial Institutions Sector

Federal, State, and Local Governments Operating in the Financial Markets

Business Borrowing: Corporate Bonds, Asset-Backed Securities, Bank Loans, and Other Forms of Business Debt

The Market for Corporate

Consumer Lending and Borrowing

The Residential Mortgage Market Stock

International Transactions and Currency Values

International Banking

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