Question 1

The Fed would use a reverse repo when they:

Accepted Answer

A) want to temporarily increase the monetary base. 
B) forecast a permanent decrease in the demand for monetary base. 
C) forecast a permanent increase in the demand for monetary base. 
D) want to temporarily decrease the monetary base. 
A) want to temporarily increase the monetary base. 
B) forecast a permanent decrease in the demand for monetary base. 
C) forecast a permanent increase in the demand for monetary base. 
D) want to temporarily decrease the monetary base.

Question 2

Which of the following statements is most correct?

Accepted Answer

A) The market federal funds rate equals the target federal funds rate. 
B) Since 2008, the market federal funds rate has remained solidly within the target range announced by the Fed. 
C) Since 2008, the market federal funds rate has varied wildly, sometimes moving outside the target range announced by the Fed. 
D) There doesn't appear to be any relationship at all between the target and market federal fund rates. 
A) The market federal funds rate equals the target federal funds rate. 
B) Since 2008, the market federal funds rate has remained solidly within the target range announced by the Fed. 
C) Since 2008, the market federal funds rate has varied wildly, sometimes moving outside the target range announced by the Fed. 
D) There doesn't appear to be any relationship at all between the target and market federal fund rates.

Question 3

If the current market federal funds rate equals the target rate and the demand for reserves decreases, the likely response in the federal funds market will be:

Accepted Answer

A) the market federal funds rate will decrease. 
B) the market federal funds rate will equal the target rate. 
C) the market federal funds rate will increase. 
D) nothing; the Fed would act immediately and the market would not be affected. 
A) the market federal funds rate will decrease. 
B) the market federal funds rate will equal the target rate. 
C) the market federal funds rate will increase. 
D) nothing; the Fed would act immediately and the market would not be affected.

Question 4

Today, reserve requirements are:

Accepted Answer

A) set in a way that makes reserve demand highly unpredictable. 
B) changed whenever the target federal funds rate is changed. 
C) changed instead of making changes in the discount rate. 
D) really not a direct tool of monetary policy. 
A) set in a way that makes reserve demand highly unpredictable. 
B) changed whenever the target federal funds rate is changed. 
C) changed instead of making changes in the discount rate. 
D) really not a direct tool of monetary policy.

Question 5

The Fed could use reserve requirements as a monetary policy instrument.In terms of desirable features for policy instruments, assess the viability of using reserve requirements.

Accepted Answer

Reserve requirements are certainly obser

Question 6

The Fed could make the market federal funds rate equal the target rate by:

Accepted Answer

A) mandating that all loans be transacted at the target rate. 
B) setting the discount rate below the federal funds rate. 
C) entering the federal funds market as a borrower or a lender. 
D) paying higher interest on reserves. 
A) mandating that all loans be transacted at the target rate. 
B) setting the discount rate below the federal funds rate. 
C) entering the federal funds market as a borrower or a lender. 
D) paying higher interest on reserves.

Question 7

In 2002, the Federal Reserve changed its discount lending procedures.Which of the following statements is correct?

Accepted Answer

A) For most of its history the Federal Reserve has lent reserve to banks at a rate equal to the target federal funds rate; after 2002 the rate would be below the target federal funds rate. 
B) The changes made in 2002 have made it more difficult for the Fed to meet its interest-rate stability objective. 
C) Before 2002 the Fed discouraged banks from borrowing and actually destabilized the interbank market for reserves. 
D) The Fed now controls the quantity of credit extended as well as its price. 
A) For most of its history the Federal Reserve has lent reserve to banks at a rate equal to the target federal funds rate; after 2002 the rate would be below the target federal funds rate. 
B) The changes made in 2002 have made it more difficult for the Fed to meet its interest-rate stability objective. 
C) Before 2002 the Fed discouraged banks from borrowing and actually destabilized the interbank market for reserves. 
D) The Fed now controls the quantity of credit extended as well as its price.

Question 8

A good definition for intermediate targets of monetary policy would be:

Accepted Answer

A) instruments under the direct control of central bankers but one step removed from operational targets. 
B) instruments that are not under the direct control of the central banks but lie between operational instruments and objectives. 
C) the quantity or non-price targets of monetary policy. 
D) the real goals of monetary policy. 
A) instruments under the direct control of central bankers but one step removed from operational targets. 
B) instruments that are not under the direct control of the central banks but lie between operational instruments and objectives. 
C) the quantity or non-price targets of monetary policy. 
D) the real goals of monetary policy.

Question 9

Given the following Taylor rule:
Target federal funds rate = 2 + current inflation + 2x(inflation gap) + x(output gap);
What do the coefficients on the inflation and output gaps (2x, x) reveal?

Accepted Answer

In this case the coefficient on the infl

Question 10

Central banks that have a hierarchical mandate with inflation targeting basically are saying:

Accepted Answer

A) hitting the inflation target is the first priority after all other stated objectives are reached. 
B) hitting the inflation target is the only objective. 
C) the inflation target is the second most important goal after economic growth, which is always the most important goal for monetary policymakers. 
D) hitting the inflation target comes first, everything else comes second. 
A) hitting the inflation target is the first priority after all other stated objectives are reached. 
B) hitting the inflation target is the only objective. 
C) the inflation target is the second most important goal after economic growth, which is always the most important goal for monetary policymakers. 
D) hitting the inflation target comes first, everything else comes second.

Question 11

Consider the desirable features of monetary policy operating instruments and the use of intermediate targets.What missing feature makes a target intermediate rather than operating? Why did the Fed abandon the use of most intermediate targets?

Accepted Answer

In the case of intermediate targets the

Question 12

Of the following, which would not be considered an unconventional monetary policy approach?

Accepted Answer

A) Discount rate 
B) Policy duration commitment 
C) Quantitative easing 
D) Credit easing 
A) Discount rate 
B) Policy duration commitment 
C) Quantitative easing 
D) Credit easing

Question 13

Discount lending ties into the Fed's function of:

Accepted Answer

A) lender of last resort. 
B) open market operations. 
C) the government's bank. 
D) regulation of banking. 
A) lender of last resort. 
B) open market operations. 
C) the government's bank. 
D) regulation of banking.

Question 14

Which of the following would be categorized as an unconventional monetary policy tool?

Accepted Answer

A) Discount window lending 
B) Targeted asset purchases 
C) Federal funds rate target 
D) Deposit rate 
A) Discount window lending 
B) Targeted asset purchases 
C) Federal funds rate target 
D) Deposit rate

Question 15

The Taylor rule assumes the real long-term interest rate would be:

Accepted Answer

A) approximately 2%. 
B) zero. 
C) five percent less the inflation rate. 
D) one percent. 
A) approximately 2%. 
B) zero. 
C) five percent less the inflation rate. 
D) one percent.

Question 16

Which of the following statements is most correct?

Accepted Answer

A) The Fed can control the amount of reserves, but cannot control the monetary base. 
B) The Fed can control the make up of the monetary base, but cannot affect the market interest rate. 
C) The Fed can control the size of the monetary base but not the price of its components. 
D) The Fed can control either the size of the monetary base or the price of its components. 
A) The Fed can control the amount of reserves, but cannot control the monetary base. 
B) The Fed can control the make up of the monetary base, but cannot affect the market interest rate. 
C) The Fed can control the size of the monetary base but not the price of its components. 
D) The Fed can control either the size of the monetary base or the price of its components.

The Fed would use a reverse repo when they:

Which of the following statements is most correct?

If the current market federal funds rate equals the target rate and the demand for reserves decreases, the likely response in the federal funds market will be:

Today, reserve requirements are:

The Fed could use reserve requirements as a monetary policy instrument.In terms of desirable features for policy instruments, assess the viability of using reserve requirements.

The Fed could make the market federal funds rate equal the target rate by:

In 2002, the Federal Reserve changed its discount lending procedures.Which of the following statements is correct?

A good definition for intermediate targets of monetary policy would be:

Given the following Taylor rule: Target federal funds rate = 2 + current inflation + 2x(inflation gap) + x(output gap); What do the coefficients on the inflation and output gaps (2x, x) reveal?

Central banks that have a hierarchical mandate with inflation targeting basically are saying:

Consider the desirable features of monetary policy operating instruments and the use of intermediate targets.What missing feature makes a target intermediate rather than operating? Why did the Fed abandon the use of most intermediate targets?

Of the following, which would not be considered an unconventional monetary policy approach?

Discount lending ties into the Fed's function of:

Which of the following would be categorized as an unconventional monetary policy tool?

The Taylor rule assumes the real long-term interest rate would be:

Which of the following statements is most correct?

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

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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Exam 18: Monetary Policy: Stabilizing the Domestic Economy

The Fed would use a reverse repo when they:

Which of the following statements is most correct?

If the current market federal funds rate equals the target rate and the demand for reserves decreases, the likely response in the federal funds market will be:

Today, reserve requirements are:

The Fed could use reserve requirements as a monetary policy instrument.In terms of desirable features for policy instruments, assess the viability of using reserve requirements.

The Fed could make the market federal funds rate equal the target rate by:

In 2002, the Federal Reserve changed its discount lending procedures.Which of the following statements is correct?

A good definition for intermediate targets of monetary policy would be:

Given the following Taylor rule: Target federal funds rate = 2 + current inflation + 2x(inflation gap) + x(output gap); What do the coefficients on the inflation and output gaps (2x, x) reveal?

Central banks that have a hierarchical mandate with inflation targeting basically are saying:

Consider the desirable features of monetary policy operating instruments and the use of intermediate targets.What missing feature makes a target intermediate rather than operating? Why did the Fed abandon the use of most intermediate targets?

Of the following, which would not be considered an unconventional monetary policy approach?

Discount lending ties into the Fed's function of:

Which of the following would be categorized as an unconventional monetary policy tool?

The Taylor rule assumes the real long-term interest rate would be:

Which of the following statements is most correct?

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

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

Filters