Question 1

Policymakers are often reluctant to turn to unconventional monetary policy measures because:

Accepted Answer

A) they are uncertain of the quantitative impact of using them. 
B) such policies are potentially too powerful. 
C) such policies require Congressional approval and Congress is often slow to act. 
D) such policies require coordination with the central bankers of foreign countries. 
A) they are uncertain of the quantitative impact of using them. 
B) such policies are potentially too powerful. 
C) such policies require Congressional approval and Congress is often slow to act. 
D) such policies require coordination with the central bankers of foreign countries.

Question 2

An easing of monetary policy should:

Accepted Answer

A) increase spending by households and businesses and increase net exports. 
B) raise net exports but lower spending by households and businesses. 
C) decrease spending by households and businesses as well as net exports. 
D) increase investment and household spending but lower net exports. 
A) increase spending by households and businesses and increase net exports. 
B) raise net exports but lower spending by households and businesses. 
C) decrease spending by households and businesses as well as net exports. 
D) increase investment and household spending but lower net exports.

Question 3

If greater stock prices can lead to greater investment spending, should central bankers ever worry about stock prices becoming too high?

Accepted Answer

Yes they should.If stock prices become i

Question 4

The impact of monetary policy on the exchange rate and net exports is best described as:

Accepted Answer

A) the strongest of all the parts of the transmission mechanism. 
B) powerful, but lagging. 
C) difficult to forecast. 
D) nonexistent. 
A) the strongest of all the parts of the transmission mechanism. 
B) powerful, but lagging. 
C) difficult to forecast. 
D) nonexistent.

Question 5

With respect to consumer behavior, the interest-rate channel of monetary policy transmission appears to be:

Accepted Answer

A) weak because people's decisions to purchase cars or houses depend more on short-term rates rather than long-term rates. 
B) weak because people's decisions to purchase cars or houses depend more on long-term rates rather than short-term rates. 
C) strong because people's decisions to purchase cars or houses depend on the short-term rates that policymakers can change. 
D) strong because it affects both spending and saving decisions. 
A) weak because people's decisions to purchase cars or houses depend more on short-term rates rather than long-term rates. 
B) weak because people's decisions to purchase cars or houses depend more on long-term rates rather than short-term rates. 
C) strong because people's decisions to purchase cars or houses depend on the short-term rates that policymakers can change. 
D) strong because it affects both spending and saving decisions.

Question 6

If a zero-coupon bond sells for par, the nominal interest rate on that bond is:

Accepted Answer

A) 100 percent. 
B) negative. 
C) zero. 
D) infinity. 
A) 100 percent. 
B) negative. 
C) zero. 
D) infinity.

Question 7

If a borrower's net worth increases:

Accepted Answer

A) the likelihood of moral hazard also increases. 
B) the borrowers are likely to want to take less risk. 
C) the moral hazard risk for the potential lenders decreases. 
D) the supply of loans decreases. 
A) the likelihood of moral hazard also increases. 
B) the borrowers are likely to want to take less risk. 
C) the moral hazard risk for the potential lenders decreases. 
D) the supply of loans decreases.

Question 8

During most of the 1970s, officials at the Fed:

Accepted Answer

A) overestimated inflation and underestimated the growth rate of potential GDP. 
B) overestimated the growth rate of potential GDP and underestimated inflation. 
C) underestimated both the growth rate of output and inflation. 
D) overestimated both the growth rate of potential GDP and inflation. 
A) overestimated inflation and underestimated the growth rate of potential GDP. 
B) overestimated the growth rate of potential GDP and underestimated inflation. 
C) underestimated both the growth rate of output and inflation. 
D) overestimated both the growth rate of potential GDP and inflation.

Question 9

The high rates of inflation that were experienced in the 1970s could partly be blamed on all of the following except:

Accepted Answer

A) the assumption the economy would continue to grow at the rates that the economy experienced in the 1960s. 
B) the Vietnam war. 
C) high oil prices. 
D) rapid growth rates of potential GDP during the 1970s. 
A) the assumption the economy would continue to grow at the rates that the economy experienced in the 1960s. 
B) the Vietnam war. 
C) high oil prices. 
D) rapid growth rates of potential GDP during the 1970s.

Question 10

When central bankers are acting preemptively they are:

Accepted Answer

A) letting markets work and taking a wait and see approach. 
B) aggressively trying to hit a zero inflation target. 
C) usually focused on reducing expansionary gaps. 
D) taking bold steps to stabilize the economy. 
A) letting markets work and taking a wait and see approach. 
B) aggressively trying to hit a zero inflation target. 
C) usually focused on reducing expansionary gaps. 
D) taking bold steps to stabilize the economy.

Question 11

During the 2007-2009 financial crisis, what prevented policy easing from being transmitted as usual to the real economy?

Accepted Answer

Essentially it was the fundamental probl

Question 12

Each of the following is a transmission channel of monetary policy, except:

Accepted Answer

A) the household net worth channel. 
B) the Treasury Securities channel. 
C) the asset-price channel. 
D) the exchange-rate channel. 
A) the household net worth channel. 
B) the Treasury Securities channel. 
C) the asset-price channel. 
D) the exchange-rate channel.

Question 13

The Federal Reserve surveys lending officers regularly to:

Accepted Answer

A) determine the interest rates they charge. 
B) get a feel for the supply and demand for loans. 
C) get a feel for the quantity and quality of loans. 
D) all of the answers given are correct. 
A) determine the interest rates they charge. 
B) get a feel for the supply and demand for loans. 
C) get a feel for the quantity and quality of loans. 
D) all of the answers given are correct.

Question 14

A way for policymakers to avoid the problems that deflation can present and still meet their objective of price stability is to:

Accepted Answer

A) set a target of zero inflation. 
B) keep the monetary base fixed. 
C) set an inflation target of two to three percent. 
D) target a nominal interest rate of zero. 
A) set a target of zero inflation. 
B) keep the monetary base fixed. 
C) set an inflation target of two to three percent. 
D) target a nominal interest rate of zero.

Question 15

In theory, lower real interest rates will tend to cause all but which of the following to increase?

Accepted Answer

A) Consumption spending 
B) Investment spending 
C) Net exports 
D) Government spending 
A) Consumption spending 
B) Investment spending 
C) Net exports 
D) Government spending

Question 16

What role, if any, did the accounting scandals involving some U.S.companies in 2001 and 2002 play in the supply of loans?

Accepted Answer

The accounting scandals potentially play

Question 17

When faced with inflation above desirable levels, is there anything that policymakers can do about concern that a deep recession will lower inflationary expectations sharply and thereby raise real interest rates in a destabilizing manner?

Accepted Answer

Yes, three things.First, they can set th

Question 18

One impact of the 2007-2009 financial crisis was to heighten the challenges faced by monetary policymakers.All but which of the following was grew more prominent as a result of the crisis?

Accepted Answer

A) Stock and property values have a tendency to go through boom and bust cycles. 
B) The nation's current account deficit keeps widening. 
C) Policymakers options are limited since the nominal interest rate cannot fall below zero. 
D) The structures of the economy and financial system are constantly evolving. 
A) Stock and property values have a tendency to go through boom and bust cycles. 
B) The nation's current account deficit keeps widening. 
C) Policymakers options are limited since the nominal interest rate cannot fall below zero. 
D) The structures of the economy and financial system are constantly evolving.

Question 19

The Federal Reserve's surveys of bank loan officers can help the Fed determine whether:

Accepted Answer

A) a drop in the quantity of loans granted resulted from fewer applications or a tightening of credit standards. 
B) an increase in the quantity of loans granted resulted from fewer applications or a tightening of credit standards. 
C) climbing interest-rate spreads are the result of more borrowers or fewer loans being granted. 
D) an increase in the quantity of new loans was due to a decrease in supply or an increase in demand. 
A) a drop in the quantity of loans granted resulted from fewer applications or a tightening of credit standards. 
B) an increase in the quantity of loans granted resulted from fewer applications or a tightening of credit standards. 
C) climbing interest-rate spreads are the result of more borrowers or fewer loans being granted. 
D) an increase in the quantity of new loans was due to a decrease in supply or an increase in demand.

Question 20

The balance-sheet channel of monetary policy works because it can:

Accepted Answer

A) increase a borrower's asset value but not the burden of his/her liabilities. 
B) change the value of a borrower's assets and liabilities, but it can't change a borrower's net worth. 
C) increase a borrower's assets and reduce the cost of his/her liabilities. 
D) none of the answers given is correct. 
A) increase a borrower's asset value but not the burden of his/her liabilities. 
B) change the value of a borrower's assets and liabilities, but it can't change a borrower's net worth. 
C) increase a borrower's assets and reduce the cost of his/her liabilities. 
D) none of the answers given is correct.

Exam 23: Modern Monetary Policy and the Challenges Facing Central Bankers

Policymakers are often reluctant to turn to unconventional monetary policy measures because:

An easing of monetary policy should:

If greater stock prices can lead to greater investment spending, should central bankers ever worry about stock prices becoming too high?

The impact of monetary policy on the exchange rate and net exports is best described as:

With respect to consumer behavior, the interest-rate channel of monetary policy transmission appears to be:

If a zero-coupon bond sells for par, the nominal interest rate on that bond is:

If a borrower's net worth increases:

During most of the 1970s, officials at the Fed:

The high rates of inflation that were experienced in the 1970s could partly be blamed on all of the following except:

When central bankers are acting preemptively they are:

During the 2007-2009 financial crisis, what prevented policy easing from being transmitted as usual to the real economy?

Each of the following is a transmission channel of monetary policy, except:

The Federal Reserve surveys lending officers regularly to:

A way for policymakers to avoid the problems that deflation can present and still meet their objective of price stability is to:

In theory, lower real interest rates will tend to cause all but which of the following to increase?

What role, if any, did the accounting scandals involving some U.S.companies in 2001 and 2002 play in the supply of loans?

When faced with inflation above desirable levels, is there anything that policymakers can do about concern that a deep recession will lower inflationary expectations sharply and thereby raise real interest rates in a destabilizing manner?

One impact of the 2007-2009 financial crisis was to heighten the challenges faced by monetary policymakers.All but which of the following was grew more prominent as a result of the crisis?

The Federal Reserve's surveys of bank loan officers can help the Fed determine whether:

The balance-sheet channel of monetary policy works because it can:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Filters