Question 1

How do the specific goals of interest rate and exchange rate stability differ in importance from the other specific goals mentioned for central bankers?

Accepted Answer

As the text mentions, interest rate and

Question 2

Monetary policy in the United States is under the control of:

Accepted Answer

A) the U.S.Treasury. 
B) the President. 
C) the Federal Reserve. 
D) the U.S.Senate. 
A) the U.S.Treasury. 
B) the President. 
C) the Federal Reserve. 
D) the U.S.Senate.

Question 3

If we look back in history, why has the role of creating money fallen to central banks?

Accepted Answer

Historically central bank money has been

Question 4

The chairman of the Fed gives a speech and hints that, at the next meeting of the Open Market Committee, the issues of a rapidly growing economy and preliminary indications of rising prices will have to be addressed.You are in the market for a new house and your mortgage broker calls to tell you that the interest rate on the $100,000, 30-year mortgage you applied for has just increased by a quarter of a percent.Why did the rate increase even though the Fed has not announced any rate change?

Accepted Answer

The rate increased because many people i

Question 5

Over very long periods, U.S.real economic growth averaged around:

Accepted Answer

A) 3 percent per year. 
B) 1 percent per year. 
C) 5 percent per year. 
D) 7 percent per year. 
A) 3 percent per year. 
B) 1 percent per year. 
C) 5 percent per year. 
D) 7 percent per year.

Question 6

If we think back to Chapter 11 when we discussed moral hazard, discuss how a government ceding the right to control the amount of currency to a central bank is a way to treat a potential moral hazard problem.

Accepted Answer

Government officials have a variety of o

Question 7

In the U.S.the authority to issue currency is held by:

Accepted Answer

A) the Federal Reserve. 
B) the U.S.Treasury. 
C) the Office of the Comptroller of the Currency. 
D) the U.S.Mint. 
A) the Federal Reserve. 
B) the U.S.Treasury. 
C) the Office of the Comptroller of the Currency. 
D) the U.S.Mint.

Question 8

The rationale for the existence of central banks is mainly that:

Accepted Answer

A) financial markets lack transparency. 
B) they are needed for the supervision of banks. 
C) financial intermediation cannot occur without a central bank. 
D) financial systems are prone to periods of extreme volatility. 
A) financial markets lack transparency. 
B) they are needed for the supervision of banks. 
C) financial intermediation cannot occur without a central bank. 
D) financial systems are prone to periods of extreme volatility.

Question 9

One problem for the Federal Reserve regarding setting policy stems from the fact that:

Accepted Answer

A) there are multiple goals that may be inconsistent with each other. 
B) there are more policy instruments than goals. 
C) Congress sets very tight goal ranges that the central bankers must hit. 
D) the membership of its governing board changes so often. 
A) there are multiple goals that may be inconsistent with each other. 
B) there are more policy instruments than goals. 
C) Congress sets very tight goal ranges that the central bankers must hit. 
D) the membership of its governing board changes so often.

Question 10

The correlation between high rates of inflation and economic growth is:

Accepted Answer

A) direct; one brings about the other. 
B) inverse; high inflation usually means low economic growth. 
C) there is no correlation between these measures. 
D) is direct at low rates of economic growth and inverse at high rates. 
A) direct; one brings about the other. 
B) inverse; high inflation usually means low economic growth. 
C) there is no correlation between these measures. 
D) is direct at low rates of economic growth and inverse at high rates.

Question 11

Which of the following statement is true?

Accepted Answer

A) Printing currency can be a profitable venture for a government. 
B) Printing currency, while necessary, is a losing venture for a government. 
C) Too much money printed usually leads to lower prices. 
D) In the modern economy the amount of money created has no effect on prices. 
A) Printing currency can be a profitable venture for a government. 
B) Printing currency, while necessary, is a losing venture for a government. 
C) Too much money printed usually leads to lower prices. 
D) In the modern economy the amount of money created has no effect on prices.

Question 12

Which of the following statements is most accurate?

Accepted Answer

A) As the inflation rate increases, inflation becomes less stable. 
B) As the inflation rate decreases inflation becomes less stable. 
C) As the inflation rate decreases inflation becomes more volatile. 
D) As the inflation rate increases, inflation becomes more stable. 
A) As the inflation rate increases, inflation becomes less stable. 
B) As the inflation rate decreases inflation becomes less stable. 
C) As the inflation rate decreases inflation becomes more volatile. 
D) As the inflation rate increases, inflation becomes more stable.

Question 13

Central banks are in a position to control risk in the economy because they:

Accepted Answer

A) control the unemployment rate. 
B) control the economy's real growth rate. 
C) control short-term interest rates. 
D) can change taxes. 
A) control the unemployment rate. 
B) control the economy's real growth rate. 
C) control short-term interest rates. 
D) can change taxes.

Question 14

At a growth rate of 6% an economy will double in size in:

Accepted Answer

A) 7 years. 
B) 14 years. 
C) 12 years. 
D) 6 years. 
A) 7 years. 
B) 14 years. 
C) 12 years. 
D) 6 years.

Question 15

What are the potential problems that can result if central bankers set a target of a zero rate of inflation?

Accepted Answer

A zero inflation target has a few proble

Question 16

Which of the following statements is not true?

Accepted Answer

A) The potential growth rate in the U.S.economy may have fallen following the financial crisis of 2007-2009. 
B) Periods of growth below the potential level are periods of low unemployment. 
C) Periods of growth above the potential level are periods of low employment. 
D) Periods of growth below the potential level are periods of high unemployment. 
A) The potential growth rate in the U.S.economy may have fallen following the financial crisis of 2007-2009. 
B) Periods of growth below the potential level are periods of low unemployment. 
C) Periods of growth above the potential level are periods of low employment. 
D) Periods of growth below the potential level are periods of high unemployment.

Question 17

There is a strong consensus among economists that monetary policy is more effective when it is formed:

Accepted Answer

A) by an individual rather than a committee. 
B) in secrecy without the reasoning behind it being revealed for many years. 
C) to keep financial markets guessing. 
D) independently of political pressure. 
A) by an individual rather than a committee. 
B) in secrecy without the reasoning behind it being revealed for many years. 
C) to keep financial markets guessing. 
D) independently of political pressure.

Question 18

Setting an explicit numerical inflation target is most associated with the goal(s) of:

Accepted Answer

A) transparency. 
B) accountability. 
C) both transparency and accountability. 
D) neither transparency nor accountability; it's about moral hazard. 
A) transparency. 
B) accountability. 
C) both transparency and accountability. 
D) neither transparency nor accountability; it's about moral hazard.

Question 19

One reason for having a monetary policy framework is:

Accepted Answer

A) it makes clear what specific goals the central bankers are pursuing. 
B) it provides leeway for central bankers to change their goals without communicating the change and disrupting financial markets. 
C) it provides central bankers the secrecy needed to perform their jobs effectively. 
D) it can make goal setting vague enough so that the central bankers can always claim success. 
A) it makes clear what specific goals the central bankers are pursuing. 
B) it provides leeway for central bankers to change their goals without communicating the change and disrupting financial markets. 
C) it provides central bankers the secrecy needed to perform their jobs effectively. 
D) it can make goal setting vague enough so that the central bankers can always claim success.

Question 20

During the financial crisis of 2007-2009 the U.S.Federal Reserve used its powers in all but which of the following ways:

Accepted Answer

A) lending to nonbanks. 
B) accepting very illiquid collateral against its loans. 
C) lowered bank reserve requirements. 
D) lowered its policy rate to zero. 
A) lending to nonbanks. 
B) accepting very illiquid collateral against its loans. 
C) lowered bank reserve requirements. 
D) lowered its policy rate to zero.

Exam 15: Central Banks in the World Today

How do the specific goals of interest rate and exchange rate stability differ in importance from the other specific goals mentioned for central bankers?

Monetary policy in the United States is under the control of:

If we look back in history, why has the role of creating money fallen to central banks?

Over very long periods, U.S.real economic growth averaged around:

If we think back to Chapter 11 when we discussed moral hazard, discuss how a government ceding the right to control the amount of currency to a central bank is a way to treat a potential moral hazard problem.

In the U.S.the authority to issue currency is held by:

The rationale for the existence of central banks is mainly that:

One problem for the Federal Reserve regarding setting policy stems from the fact that:

The correlation between high rates of inflation and economic growth is:

Which of the following statement is true?

Which of the following statements is most accurate?

Central banks are in a position to control risk in the economy because they:

At a growth rate of 6% an economy will double in size in:

What are the potential problems that can result if central bankers set a target of a zero rate of inflation?

Which of the following statements is not true?

There is a strong consensus among economists that monetary policy is more effective when it is formed:

Setting an explicit numerical inflation target is most associated with the goal(s) of:

One reason for having a monetary policy framework is:

During the financial crisis of 2007-2009 the U.S.Federal Reserve used its powers in all but which of the following ways:

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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