Question 1

All of the following are true about central bank independence except that it:

Accepted Answer

A) is usually given at the pleasure of governments. 
B) can be eliminated by governments in a time of crisis. 
C) is usually guaranteed by a country's constitution. 
D) can be subverted by the actions of fiscal policymakers. 
A) is usually given at the pleasure of governments. 
B) can be eliminated by governments in a time of crisis. 
C) is usually guaranteed by a country's constitution. 
D) can be subverted by the actions of fiscal policymakers.

Question 2

What may be the reasons that explain the observation that during periods of hyperinflation economic growth actually slows or even contracts?

Accepted Answer

Periods of hyperinflation or highly unst

Question 3

The monetary policy framework is:

Accepted Answer

A) the Law that created the Federal Reserve System. 
B) the idea that central banks should be interconnected across countries. 
C) a way to prioritize and implement the central bank's objectives when they are in conflict. 
D) a growing belief that there should be one central bank headquartered at the World Bank. 
A) the Law that created the Federal Reserve System. 
B) the idea that central banks should be interconnected across countries. 
C) a way to prioritize and implement the central bank's objectives when they are in conflict. 
D) a growing belief that there should be one central bank headquartered at the World Bank.

Question 4

If a government were to find that it cannot raise taxes any further, and that it cannot borrow any further from financial markets, the government:

Accepted Answer

A) cannot increase its spending any further. 
B) can increase spending by having the central banks purchase its bonds. 
C) is in default. 
D) can decrease the amount of money in circulation. 
A) cannot increase its spending any further. 
B) can increase spending by having the central banks purchase its bonds. 
C) is in default. 
D) can decrease the amount of money in circulation.

Question 5

The specific goals of central banks include each of the following, except:

Accepted Answer

A) high and stable real growth. 
B) low and stable inflation. 
C) high levels of exports. 
D) low and stable unemployment. 
A) high and stable real growth. 
B) low and stable inflation. 
C) high levels of exports. 
D) low and stable unemployment.

Question 6

Central bank accountability means:

Accepted Answer

A) politicians will establish goals and central bankers will report on their progress. 
B) central bankers are not accountable to any elected officials. 
C) central bankers are only accountable to the banks in their respective countries. 
D) central bankers must hold press conferences to explain their monetary policy views. 
A) politicians will establish goals and central bankers will report on their progress. 
B) central bankers are not accountable to any elected officials. 
C) central bankers are only accountable to the banks in their respective countries. 
D) central bankers must hold press conferences to explain their monetary policy views.

Question 7

Which of the following statements is most true concerning economic policy in the U.S.?

Accepted Answer

A) Monetary policymakers tend to have a long view while fiscal policymakers tend to ignore the long-run inflationary ramifications of their actions. 
B) Fiscal policymakers tend to focus on inflation and unemployment while monetary policymakers focus most of their attention on the money supply and the exchange rate. 
C) Fiscal policymakers tend to focus more on pleasing their constituents and so are willing to sacrifice the short run for the long run. 
D) Monetary policy independence is enshrined in the U.S.Constitution. 
A) Monetary policymakers tend to have a long view while fiscal policymakers tend to ignore the long-run inflationary ramifications of their actions. 
B) Fiscal policymakers tend to focus on inflation and unemployment while monetary policymakers focus most of their attention on the money supply and the exchange rate. 
C) Fiscal policymakers tend to focus more on pleasing their constituents and so are willing to sacrifice the short run for the long run. 
D) Monetary policy independence is enshrined in the U.S.Constitution.

Question 8

We have a country, Fantasyland, where the current per capita real income is 20,000 units of output, and the current average growth rate is 2.0 percent.What will be the difference in the standard of living twenty years from now if Fantasyland grows at a rate of 3.5 percent and we assume population is constant?

Accepted Answer

We can use a financial calculator or exp

Question 9

One argument for an independent central bank is:

Accepted Answer

A) successful monetary policy requires a long time horizon usually well beyond the next election of most public officials. 
B) without independence competent people would not take a position in a central bank. 
C) the central bank usually hires more competent individuals than the Treasury department or other finance ministries. 
D) central bankers have a short-run focus that usually corrects problems faster. 
A) successful monetary policy requires a long time horizon usually well beyond the next election of most public officials. 
B) without independence competent people would not take a position in a central bank. 
C) the central bank usually hires more competent individuals than the Treasury department or other finance ministries. 
D) central bankers have a short-run focus that usually corrects problems faster.

Question 10

One thing that is true about economic policy in the U.S.is:

Accepted Answer

A) fiscal and monetary policy never conflict. 
B) monetary and fiscal policy need not, but may conflict. 
C) monetary policy ultimately controls fiscal policy since the Fed controls the money supply. 
D) fiscal policy ultimately controls monetary policy since Congress can control the Fed's budget. 
A) fiscal and monetary policy never conflict. 
B) monetary and fiscal policy need not, but may conflict. 
C) monetary policy ultimately controls fiscal policy since the Fed controls the money supply. 
D) fiscal policy ultimately controls monetary policy since Congress can control the Fed's budget.

Question 11

All of the following are consequences of an economy operating above its potential level except:

Accepted Answer

A) high rates of inflation. 
B) high interest rates. 
C) low unemployment. 
D) stable prices. 
A) high rates of inflation. 
B) high interest rates. 
C) low unemployment. 
D) stable prices.

Question 12

Most economists agree that the target rate of inflation for the central banks should be:

Accepted Answer

A) between 7 and 9 percent. 
B) less than zero. 
C) above zero for fears of deflation. 
D) something over 3 but less than 6 percent. 
A) between 7 and 9 percent. 
B) less than zero. 
C) above zero for fears of deflation. 
D) something over 3 but less than 6 percent.

Question 13

Today there is a clear consensus about the best way to design a central bank.What are the criteria for a successful central bank?

Accepted Answer

To be successful, a central bank must (1

Question 14

The text points out that the apparent result of central bank independence has been better performing economies.Why do you think it took so long for many countries to create independent central banks?

Accepted Answer

One reason is that central banks were cr

Question 15

The problem for a central bank setting a zero inflation policy would be:

Accepted Answer

A) the risk of high employment. 
B) it is impossible to have zero inflation. 
C) firms would have to cut the nominal wage to reduce the real wage. 
D) economic growth would also have to be zero. 
A) the risk of high employment. 
B) it is impossible to have zero inflation. 
C) firms would have to cut the nominal wage to reduce the real wage. 
D) economic growth would also have to be zero.

Question 16

Many governments give their central bank control over issuing currency because:

Accepted Answer

A) printing currency can be profitable for a government so government officials may have a strong incentive to print too much. 
B) having large amounts of currency can lead to lower rates of inflation. 
C) central banks use the profits from issuing currency to finance their operations. 
D) the only way to distribute currency to banks is through the central bank. 
A) printing currency can be profitable for a government so government officials may have a strong incentive to print too much. 
B) having large amounts of currency can lead to lower rates of inflation. 
C) central banks use the profits from issuing currency to finance their operations. 
D) the only way to distribute currency to banks is through the central bank.

Question 17

The ability to create money means the central bank can control:

Accepted Answer

A) the availability of money and credit in a country's economy. 
B) tax revenue. 
C) the unemployment rate. 
D) government expenditures. 
A) the availability of money and credit in a country's economy. 
B) tax revenue. 
C) the unemployment rate. 
D) government expenditures.

Question 18

The main problem from inflation as seen by most economists is:

Accepted Answer

A) inflation raises prices more than wages. 
B) inflation harms lenders more than it benefits borrowers. 
C) during periods of inflation some prices fall. 
D) inflation creates risk. 
A) inflation raises prices more than wages. 
B) inflation harms lenders more than it benefits borrowers. 
C) during periods of inflation some prices fall. 
D) inflation creates risk.

Question 19

Which is a function of modern central banks?

Accepted Answer

A) To control securities markets 
B) To control the government's budget 
C) To control the availability of money and credit 
D) To manage fiscal policy 
A) To control securities markets 
B) To control the government's budget 
C) To control the availability of money and credit 
D) To manage fiscal policy

Question 20

The Federal Reserve's Fedwire system is used mainly to provide:

Accepted Answer

A) a means for foreign banks to transfer funds to U.S.banks. 
B) an inexpensive and reliable way for financial institutions to transfer funds to one another. 
C) an inexpensive way for individuals to pay their bills on-line. 
D) a means for the Treasury to collect tax payments. 
A) a means for foreign banks to transfer funds to U.S.banks. 
B) an inexpensive and reliable way for financial institutions to transfer funds to one another. 
C) an inexpensive way for individuals to pay their bills on-line. 
D) a means for the Treasury to collect tax payments.

Exam 15: Central Banks in the World Today

All of the following are true about central bank independence except that it:

What may be the reasons that explain the observation that during periods of hyperinflation economic growth actually slows or even contracts?

The monetary policy framework is:

If a government were to find that it cannot raise taxes any further, and that it cannot borrow any further from financial markets, the government:

The specific goals of central banks include each of the following, except:

Central bank accountability means:

Which of the following statements is most true concerning economic policy in the U.S.?

One argument for an independent central bank is:

One thing that is true about economic policy in the U.S.is:

All of the following are consequences of an economy operating above its potential level except:

Most economists agree that the target rate of inflation for the central banks should be:

Today there is a clear consensus about the best way to design a central bank.What are the criteria for a successful central bank?

The text points out that the apparent result of central bank independence has been better performing economies.Why do you think it took so long for many countries to create independent central banks?

The problem for a central bank setting a zero inflation policy would be:

Many governments give their central bank control over issuing currency because:

The ability to create money means the central bank can control:

The main problem from inflation as seen by most economists is:

Which is a function of modern central banks?

The Federal Reserve's Fedwire system is used mainly to provide:

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

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

Modern Monetary Policy and the Challenges Facing Central Bankers

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