Question 1

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

Accepted Answer

A) discount loans do not affect the money supply. 
B) it does not have as much control over discount loans as it has on open market operations. 
C) it is prohibited from doing so by an act of Congress. 
D) it prefers to use reserve requirements. 
A) discount loans do not affect the money supply. 
B) it does not have as much control over discount loans as it has on open market operations. 
C) it is prohibited from doing so by an act of Congress. 
D) it prefers to use reserve requirements. B

Question 2

How does the Open Market Trading Desk conduct its operations?

Accepted Answer

A) directly with private securities dealers on the floor of the New York Stock Exchange 
B) directly with private securities dealers on the floor of the Federal Reserve Bank of New York 
C) over-the-counter electronically with private securities dealers 
D) by sending its buy and sell orders to the U.S. Treasury for execution 
A) directly with private securities dealers on the floor of the New York Stock Exchange 
B) directly with private securities dealers on the floor of the Federal Reserve Bank of New York 
C) over-the-counter electronically with private securities dealers 
D) by sending its buy and sell orders to the U.S. Treasury for execution C

Question 3

The Fed has attempted to solve the problems of being unable to directly control the variables that determine economic performance and the timing lags in observing and reacting to economic fluctuations by

Accepted Answer

A) pressing Congress for legislation which would expand its powers. 
B) using targets to meet its goals. 
C) abandoning some goals in order to achieve others. 
D) devising new monetary policy tools. 
A) pressing Congress for legislation which would expand its powers. 
B) using targets to meet its goals. 
C) abandoning some goals in order to achieve others. 
D) devising new monetary policy tools. B

Question 4

Which of the following describes the relationship between the actual federal funds rate and that suggested by Taylor's rule following the recovery from the 2001 recession?

Accepted Answer

A) The federal funds rate was above that suggested by Taylor's rule. 
B) The federal funds rate was below that suggested by Taylor's rule. 
C) The federal funds rate was about equal to that suggested by Taylor's rule. 
D) There was not a clear relationship between the federal funds rate and that suggested by Taylor's rule. 
A) The federal funds rate was above that suggested by Taylor's rule. 
B) The federal funds rate was below that suggested by Taylor's rule. 
C) The federal funds rate was about equal to that suggested by Taylor's rule. 
D) There was not a clear relationship between the federal funds rate and that suggested by Taylor's rule.

Question 5

In practice, the Board of Governors and FOMC typically defer to the policy proposals of the:

Accepted Answer

A) President 
B) Chair of the Fed 
C) Secretary of Treasury 
D) Speaker of the House 
A) President 
B) Chair of the Fed 
C) Secretary of Treasury 
D) Speaker of the House

Question 6

Which of the following accurately describes the Fed's inflation target?

Accepted Answer

A) It is implicit rather than explicit. 
B) It seeks to maintain an average inflation rate of 2% per year. 
C) It seeks to keep inflation at 2% all the time. 
D) Its goal is to achieve zero inflation. 
A) It is implicit rather than explicit. 
B) It seeks to maintain an average inflation rate of 2% per year. 
C) It seeks to keep inflation at 2% all the time. 
D) Its goal is to achieve zero inflation.

Question 7

What is quantitative easing? What was the Fed's objective in implementing quantitative easing?

Accepted Answer

Quantitative easing is a policy when a c

Question 8

When Ben Bernanke referred to the exit strategy of the Fed, he was referring to:

Accepted Answer

A) his plans to retire as chair of the Fed 
B) when the Fed would stop implementing monetary policy 
C) the process by which the Fed would shrink its balance sheet 
D) increasing the federal funds rate back to where it was prior to the financial crisis 
A) his plans to retire as chair of the Fed 
B) when the Fed would stop implementing monetary policy 
C) the process by which the Fed would shrink its balance sheet 
D) increasing the federal funds rate back to where it was prior to the financial crisis

Question 9

What is meant by inflation targeting? Does the Fed engage in inflation targeting?

Accepted Answer

Under inflation targeting a ce

Question 10

In the federal funds market diagram, a decrease in the required reserve ratio

Accepted Answer

A) shifts the demand curve for reserves to the left. 
B) increases the federal funds rate. 
C) results in a multiple expansion of deposits, which increases the equilibrium level of reserves held by banks. 
D) shifts the supply curve for reserves to the right. 
A) shifts the demand curve for reserves to the left. 
B) increases the federal funds rate. 
C) results in a multiple expansion of deposits, which increases the equilibrium level of reserves held by banks. 
D) shifts the supply curve for reserves to the right.

Question 11

If the account manager finds that the current level of bank reserves is greater than the desired level indicated in the most recent directive from the FOMC, he will

Accepted Answer

A) order banks to reduce their reserves. 
B) order banks to raise their interest rates in an attempt to get them to loan out more of their reserves. 
C) conduct an open market purchase. 
D) conduct an open market sale. 
A) order banks to reduce their reserves. 
B) order banks to raise their interest rates in an attempt to get them to loan out more of their reserves. 
C) conduct an open market purchase. 
D) conduct an open market sale.

Question 12

An important problem facing the Fed is that

Accepted Answer

A) the goals for economic growth and price stability may conflict in the short run. 
B) it lost effective control over the monetary base. 
C) it has been given responsibility for meeting policy goals, but true control over monetary policy remains with Congress. 
D) it has been given responsibility for meeting policy goals, but true control over monetary policy remains with the President. 
A) the goals for economic growth and price stability may conflict in the short run. 
B) it lost effective control over the monetary base. 
C) it has been given responsibility for meeting policy goals, but true control over monetary policy remains with Congress. 
D) it has been given responsibility for meeting policy goals, but true control over monetary policy remains with the President.

Question 13

Most economists believe that a zero rate of unemployment

Accepted Answer

A) is obtainable with the correct monetary policy. 
B) would result in a better functioning economy. 
C) is inconsistent with a well-functioning economy. 
D) is obtainable only if the inflation rate is also zero. 
A) is obtainable with the correct monetary policy. 
B) would result in a better functioning economy. 
C) is inconsistent with a well-functioning economy. 
D) is obtainable only if the inflation rate is also zero.

Question 14

Which of the following statements about the natural rate of unemployment is correct?

Accepted Answer

A) Currently, most economists think that the natural rate is between 5% and 6%. 
B) Currently, most economists believe the natural rate is zero. 
C) When unemployment is at its natural rate, then only frictional unemployment remains. 
D) When unemployment is at its natural rate, then only structural unemployment remains. 
A) Currently, most economists think that the natural rate is between 5% and 6%. 
B) Currently, most economists believe the natural rate is zero. 
C) When unemployment is at its natural rate, then only frictional unemployment remains. 
D) When unemployment is at its natural rate, then only structural unemployment remains.

Question 15

How did the federal funds rate compare to that suggested by Taylor's rule following the 2001 recession and during the Financial Crisis of 2007-2009? How would proponents of Taylor's rule evaluate monetary policy in each period.

Accepted Answer

Following the recession of 2001, the fed

Question 16

According to the Taylor rule, what should the federal funds rate target be if inflation is 5%, the target rate of inflation is 2%, the equilibrium real federal funds rate is 2%, full-employment real GDP is $9 trillion, and current real GDP is $8.55 trillion?

Accepted Answer

Fed funds rate targe

Question 17

Dynamic open market operations

Accepted Answer

A) are aimed at achieving changes in monetary policy. 
B) are used much more frequently than defensive open market transactions. 
C) are used to offset disturbances to the monetary base. 
D) make it easy to deduce the Fed's intentions for monetary policy. 
A) are aimed at achieving changes in monetary policy. 
B) are used much more frequently than defensive open market transactions. 
C) are used to offset disturbances to the monetary base. 
D) make it easy to deduce the Fed's intentions for monetary policy.

Question 18

A matched sale-purchase transaction is also known as a

Accepted Answer

A) reverse repo. 
B) discount loan. 
C) put option. 
D) federal funds loan. 
A) reverse repo. 
B) discount loan. 
C) put option. 
D) federal funds loan.

Question 19

What was the name of the plan, enacted in 2011, in which the Fed bought $400 billion worth of long-term securities while selling $400 billion worth of short-term securities?

Accepted Answer

A) Operation Go Long 
B) Operation Twist 
C) QE2 
D) QE3 
A) Operation Go Long 
B) Operation Twist 
C) QE2 
D) QE3

Question 20

The third round of quantitative easing, announced in September 2012, was focused on purchases of:

Accepted Answer

A) short-term Treasury bills 
B) long-term Treasury notes 
C) long-term Treasury notes and sales of short-term Treasury bills 
D) mortgage-backed securities 
A) short-term Treasury bills 
B) long-term Treasury notes 
C) long-term Treasury notes and sales of short-term Treasury bills 
D) mortgage-backed securities

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

How does the Open Market Trading Desk conduct its operations?

The Fed has attempted to solve the problems of being unable to directly control the variables that determine economic performance and the timing lags in observing and reacting to economic fluctuations by

Which of the following describes the relationship between the actual federal funds rate and that suggested by Taylor's rule following the recovery from the 2001 recession?

In practice, the Board of Governors and FOMC typically defer to the policy proposals of the:

Which of the following accurately describes the Fed's inflation target?

What is quantitative easing? What was the Fed's objective in implementing quantitative easing?

When Ben Bernanke referred to the exit strategy of the Fed, he was referring to:

What is meant by inflation targeting? Does the Fed engage in inflation targeting?

In the federal funds market diagram, a decrease in the required reserve ratio

If the account manager finds that the current level of bank reserves is greater than the desired level indicated in the most recent directive from the FOMC, he will

An important problem facing the Fed is that

Most economists believe that a zero rate of unemployment

Which of the following statements about the natural rate of unemployment is correct?

How did the federal funds rate compare to that suggested by Taylor's rule following the 2001 recession and during the Financial Crisis of 2007-2009? How would proponents of Taylor's rule evaluate monetary policy in each period.

According to the Taylor rule, what should the federal funds rate target be if inflation is 5%, the target rate of inflation is 2%, the equilibrium real federal funds rate is 2%, full-employment real GDP is $9 trillion, and current real GDP is $8.55 trillion?

Dynamic open market operations

A matched sale-purchase transaction is also known as a

What was the name of the plan, enacted in 2011, in which the Fed bought $400 billion worth of long-term securities while selling $400 billion worth of short-term securities?

The third round of quantitative easing, announced in September 2012, was focused on purchases of:

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters

Exam 15: Monetary Policy

The Fed tends not to use discount policy as its principal tool in influencing the money supply since

How does the Open Market Trading Desk conduct its operations?

The Fed has attempted to solve the problems of being unable to directly control the variables that determine economic performance and the timing lags in observing and reacting to economic fluctuations by

Which of the following describes the relationship between the actual federal funds rate and that suggested by Taylor's rule following the recovery from the 2001 recession?

In practice, the Board of Governors and FOMC typically defer to the policy proposals of the:

Which of the following accurately describes the Fed's inflation target?

What is quantitative easing? What was the Fed's objective in implementing quantitative easing?

When Ben Bernanke referred to the exit strategy of the Fed, he was referring to:

What is meant by inflation targeting? Does the Fed engage in inflation targeting?

In the federal funds market diagram, a decrease in the required reserve ratio

If the account manager finds that the current level of bank reserves is greater than the desired level indicated in the most recent directive from the FOMC, he will

An important problem facing the Fed is that

Most economists believe that a zero rate of unemployment

Which of the following statements about the natural rate of unemployment is correct?

How did the federal funds rate compare to that suggested by Taylor's rule following the 2001 recession and during the Financial Crisis of 2007-2009? How would proponents of Taylor's rule evaluate monetary policy in each period.

According to the Taylor rule, what should the federal funds rate target be if inflation is 5%, the target rate of inflation is 2%, the equilibrium real federal funds rate is 2%, full-employment real GDP is $9 trillion, and current real GDP is $8.55 trillion?

Dynamic open market operations

A matched sale-purchase transaction is also known as a

What was the name of the plan, enacted in 2011, in which the Fed bought $400 billion worth of long-term securities while selling $400 billion worth of short-term securities?

The third round of quantitative easing, announced in September 2012, was focused on purchases of:

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters