Question 1

The Reserve Bank of New Zealand ________.

Accepted Answer

A)  is one of the most independent central banks 
B)  as the sole objective of price stability 
C)  negotiates with the minister of finance to make a Policy Targets Agreement 
D)  all of the above 
A)  is one of the most independent central banks 
B)  as the sole objective of price stability 
C)  negotiates with the minister of finance to make a Policy Targets Agreement 
D)  all of the above

Question 2

Which of the following is a NOT an advantage to monetary targeting?

Accepted Answer

A)  It relies on a stable money-inflation relationship. 
B)  There is a delayed signal about the achievement of a target. 
C)  It implies larger output fluctuations. 
D)  It implies a lack of transparency. 
A)  It relies on a stable money-inflation relationship. 
B)  There is a delayed signal about the achievement of a target. 
C)  It implies larger output fluctuations. 
D)  It implies a lack of transparency.

Question 3

Compared to the United States,Japan's experience with monetary targeting performed ________.

Accepted Answer

A)  better with regard to the inflation rate and output fluctuations 
B)  worse with regard to the inflation rate and output fluctuations 
C)  better with regard to the inflation rate, but worse with regard to output fluctuations 
D)  worse with regard to the inflation rate, but better with regard to output fluctuations 
A)  better with regard to the inflation rate and output fluctuations 
B)  worse with regard to the inflation rate and output fluctuations 
C)  better with regard to the inflation rate, but worse with regard to output fluctuations 
D)  worse with regard to the inflation rate, but better with regard to output fluctuations

Question 4

Which of the following is a disadvantage of inflation targeting?

Accepted Answer

A)  There is simplicity and clarity of the target. 
B)  Inflation targeting does not rely on a stable money-inflation relationship. 
C)  There is a delayed signal on the achievement of the target. 
D)  Inflation targeting reduces the effects of inflation shocks. 
A)  There is simplicity and clarity of the target. 
B)  Inflation targeting does not rely on a stable money-inflation relationship. 
C)  There is a delayed signal on the achievement of the target. 
D)  Inflation targeting reduces the effects of inflation shocks.

Question 5

The natural rate of output is also known as ________.

Accepted Answer

A)  potential output 
B)  NAIRU 
C)  structural output 
D)  GDP 
A)  potential output 
B)  NAIRU 
C)  structural output 
D)  GDP

Question 6

What are the advantages inflation targeting?

Accepted Answer

The advantages of inflation targeting in

Question 7

Hierarchical mandates ________.

Accepted Answer

A)  puts the goal of price stability first and then allows for other goals 
B)  requires all goals to be met simultaneously 
C)  is only used by the Bank of Canada 
D)  is only used by the Federal Reserve 
A)  puts the goal of price stability first and then allows for other goals 
B)  requires all goals to be met simultaneously 
C)  is only used by the Bank of Canada 
D)  is only used by the Federal Reserve

Question 8

Explain and demonstrate graphically how targeting nonborrowed reserves can result in overnight rate instability.

Accepted Answer

When nonborrowed reserves are held const

Question 9

Which of the following is an advantage to monetary targeting?

Accepted Answer

A)  There is an immediate signal on the achievement of the target. 
B)  It does not rely on a stable money-inflation relationship. 
C)  It implies lack of transparency. 
D)  It implies smaller output fluctuations. 
A)  There is an immediate signal on the achievement of the target. 
B)  It does not rely on a stable money-inflation relationship. 
C)  It implies lack of transparency. 
D)  It implies smaller output fluctuations.

Question 10

Inflation leads to ________.

Accepted Answer

A)  price instability 
B)  lower economic growth 
C)  public hostility 
D)  all of the above 
A)  price instability 
B)  lower economic growth 
C)  public hostility 
D)  all of the above

Question 11

In the 1975-1981 period,the Bank of Canada used ________ as the intermediate target of monetary policy.

Accepted Answer

A)  the growth rate of M1 
B)  the growth rate of M2 
C)  the interest rate 
D)  the exchange rate 
A)  the growth rate of M1 
B)  the growth rate of M2 
C)  the interest rate 
D)  the exchange rate

Question 12

The rate of inflation increases when ________.

Accepted Answer

A)  the unemployment rate equals the NAIRU 
B)  the unemployment rate exceeds the NAIRU 
C)  the unemployment rate is less than the NAIRU 
D)  the unemployment rate increases faster than the NAIRU increases 
A)  the unemployment rate equals the NAIRU 
B)  the unemployment rate exceeds the NAIRU 
C)  the unemployment rate is less than the NAIRU 
D)  the unemployment rate increases faster than the NAIRU increases

Question 13

The first country to adopt inflation targeting was ________.

Accepted Answer

A)  the United Kingdom 
B)  Canada 
C)  New Zealand 
D)  Australia 
A)  the United Kingdom 
B)  Canada 
C)  New Zealand 
D)  Australia

Question 14

If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate,then real interest rates will ________ and monetary policy will be too ________.

Accepted Answer

A)  rise; tight 
B)  rise; loose 
C)  fall; tight 
D)  fall; loose 
A)  rise; tight 
B)  rise; loose 
C)  fall; tight 
D)  fall; loose

Question 15

New Zealand adopted inflation targeting in ________.

Accepted Answer

A)  1990 
B)  1991 
C)  1992 
D)  1994 
A)  1990 
B)  1991 
C)  1992 
D)  1994

Question 16

In July 1993,Board of Governors Chairman Alan Greenspan testified in Congress that the Fed would no longer use what as a guide for conducting monetary policy?

Accepted Answer

A)  The inflation rate 
B)  Monetary aggregates 
C)  Implicit nominal anchors 
D)  The federal funds rate 
A)  The inflation rate 
B)  Monetary aggregates 
C)  Implicit nominal anchors 
D)  The federal funds rate

Question 17

A potential policy instrument for the Bank of Canada is ________.

Accepted Answer

A)  the monetary base 
B)  borrowed reserves 
C)  the overnight funds rate 
D)  the nonborrowed monetary base 
E)  All of the above 
A)  the monetary base 
B)  borrowed reserves 
C)  the overnight funds rate 
D)  the nonborrowed monetary base 
E)  All of the above

Question 18

If the relationship between the monetary aggregate and the goal variable is weak,then ________.

Accepted Answer

A)  monetary aggregate targeting is superior to exchange-rate targeting 
B)  monetary aggregate targeting is superior to inflation targeting 
C)  inflation targeting is superior to exchange-rate targeting 
D)  monetary aggregate targeting will not work 
A)  monetary aggregate targeting is superior to exchange-rate targeting 
B)  monetary aggregate targeting is superior to inflation targeting 
C)  inflation targeting is superior to exchange-rate targeting 
D)  monetary aggregate targeting will not work

Question 19

Which of the following countries have hierarchical mandates?

Accepted Answer

A)  Reserve Bank of New Zealand 
B)  Bank of Canada 
C)  Bank of England 
D)  all of the above 
A)  Reserve Bank of New Zealand 
B)  Bank of Canada 
C)  Bank of England 
D)  all of the above

Question 20

Price stability is defined as ________.

Accepted Answer

A)  low inflation 
B)  low and stable inflation 
C)  stable inflation 
D)  core inflation 
A)  low inflation 
B)  low and stable inflation 
C)  stable inflation 
D)  core inflation

Exam 18: The Conduct of Monetary Policy: Strategy and Tactics

The Reserve Bank of New Zealand ________.

Which of the following is a NOT an advantage to monetary targeting?

Compared to the United States,Japan's experience with monetary targeting performed ________.

Which of the following is a disadvantage of inflation targeting?

The natural rate of output is also known as ________.

What are the advantages inflation targeting?

Hierarchical mandates ________.

Explain and demonstrate graphically how targeting nonborrowed reserves can result in overnight rate instability.

Which of the following is an advantage to monetary targeting?

Inflation leads to ________.

In the 1975-1981 period,the Bank of Canada used ________ as the intermediate target of monetary policy.

The rate of inflation increases when ________.

The first country to adopt inflation targeting was ________.

If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate,then real interest rates will ________ and monetary policy will be too ________.

New Zealand adopted inflation targeting in ________.

In July 1993,Board of Governors Chairman Alan Greenspan testified in Congress that the Fed would no longer use what as a guide for conducting monetary policy?

A potential policy instrument for the Bank of Canada is ________.

If the relationship between the monetary aggregate and the goal variable is weak,then ________.

Which of the following countries have hierarchical mandates?

Price stability is defined as ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate,then real interest rates will and monetary policy will be too .