Question 1

The Fed can implement open market operations

Accepted Answer

A) more rapidly than changes in reserve requirements, but less rapidly than changes in the discount rate. 
B) more rapidly than changes in the discount rate, but less rapidly than changes in reserve requirements. 
C) less rapidly than either changes in the discount rate or changes in reserve requirements. 
D) more rapidly than either changes in the discount rate or changes in reserve requirements. 
A) more rapidly than changes in reserve requirements, but less rapidly than changes in the discount rate. 
B) more rapidly than changes in the discount rate, but less rapidly than changes in reserve requirements. 
C) less rapidly than either changes in the discount rate or changes in reserve requirements. 
D) more rapidly than either changes in the discount rate or changes in reserve requirements.

Question 2

The Fed's goal of interest rate stability

Accepted Answer

A) was formally abandoned in 1998. 
B) is motivated by political pressure as well as by a desire for a stable saving and investment environment. 
C) is undermined by actions the Fed takes to further its goal of stability in financial markets and institutions. 
D) is undermined by actions the Fed takes to further its goal of price stability. 
A) was formally abandoned in 1998. 
B) is motivated by political pressure as well as by a desire for a stable saving and investment environment. 
C) is undermined by actions the Fed takes to further its goal of stability in financial markets and institutions. 
D) is undermined by actions the Fed takes to further its goal of price stability.

Question 3

Discount loans intended for banks that are not financially healthy are called

Accepted Answer

A) primary credit. 
B) secondary credit. 
C) seasonal credit. 
D) repo loans. 
A) primary credit. 
B) secondary credit. 
C) seasonal credit. 
D) repo loans.

Question 4

Inflation is an economic problem because it

Accepted Answer

A) leads inevitably to unemployment. 
B) makes prices less useful as signals for resource allocation. 
C) leads to recession. 
D) results in rapid increases in the money supply. 
A) leads inevitably to unemployment. 
B) makes prices less useful as signals for resource allocation. 
C) leads to recession. 
D) results in rapid increases in the money supply.

Question 5

In order to increase its target for the federal funds rate, the Fed would normally

Accepted Answer

A) conduct open market sales. 
B) conduct open market purchases. 
C) increase the discount rate. 
D) increase reserve requirements. 
A) conduct open market sales. 
B) conduct open market purchases. 
C) increase the discount rate. 
D) increase reserve requirements.

Question 6

Which of the following is an operating target?

Accepted Answer

A) M1 
B) M2 
C) nonborrowed reserves 
D) the inflation rate 
A) M1 
B) M2 
C) nonborrowed reserves 
D) the inflation rate

Question 7

High employment spurs economic growth because high employment

Accepted Answer

A) usually reduces inflation. 
B) discourages foreign imports. 
C) often leads to a high birth rate. 
D) often leads to high rates of investment. 
A) usually reduces inflation. 
B) discourages foreign imports. 
C) often leads to a high birth rate. 
D) often leads to high rates of investment.

Question 8

Which of the following is considered to be a goal of monetary policy?

Accepted Answer

A) a low federal budget deficit 
B) fair wages 
C) price stability 
D) an end to poverty 
A) a low federal budget deficit 
B) fair wages 
C) price stability 
D) an end to poverty

Question 9

As a result of an open market purchase, bank reserves

Accepted Answer

A) rise and interest rates fall. 
B) fall and interest rates rise. 
C) and interest rates both rise. 
D) and interest rates both fall. 
A) rise and interest rates fall. 
B) fall and interest rates rise. 
C) and interest rates both rise. 
D) and interest rates both fall.

Question 10

The original Federal Reserve Act

Accepted Answer

A) specified open market operations as the Fed's main policy tool. 
B) specified open market operations as one of several Fed policy tools. 
C) specified that open market operations be employed by the Fed only in circumstances where discount loans were ineffective. 
D) did not specifically mention open market operations. 
A) specified open market operations as the Fed's main policy tool. 
B) specified open market operations as one of several Fed policy tools. 
C) specified that open market operations be employed by the Fed only in circumstances where discount loans were ineffective. 
D) did not specifically mention open market operations.

Question 11

Intermediate targets are

Accepted Answer

A) interim goals set on the way to fully achieving policy goals. 
B) targets for policy goals that are of secondary importance. 
C) targets the Fed hopes to achieve by June of each year. 
D) financial variables, such as interest rates or monetary aggregates, the Fed believes will help it to achieve policy goals. 
A) interim goals set on the way to fully achieving policy goals. 
B) targets for policy goals that are of secondary importance. 
C) targets the Fed hopes to achieve by June of each year. 
D) financial variables, such as interest rates or monetary aggregates, the Fed believes will help it to achieve policy goals.

Question 12

The unemployment that is caused by changes in the economy, such as shifts in manufacturing techniques, increased use of computers and electronic machines, and increases in the production of services instead of goods, is called

Accepted Answer

A) frictional unemployment. 
B) structural unemployment. 
C) cyclical unemployment. 
D) natural unemployment. 
A) frictional unemployment. 
B) structural unemployment. 
C) cyclical unemployment. 
D) natural unemployment.

Question 13

In 2006, the Bank of Japan adopted a policy framework focusing on

Accepted Answer

A) expected inflation one to two years in the future. 
B) current inflation. 
C) maintaining a fixed exchange rate. 
D) the growth in the money supply. 
A) expected inflation one to two years in the future. 
B) current inflation. 
C) maintaining a fixed exchange rate. 
D) the growth in the money supply.

Question 14

What was the goal of Operation Twist?

Accepted Answer

A) to reduce long-term interest rates and increase short-term interest rates 
B) to reduce short-term interest rates and increase long-term interest rates 
C) to reduce both short-term and long-term interest rates 
D) to increase both short-term and long-term interest rates 
A) to reduce long-term interest rates and increase short-term interest rates 
B) to reduce short-term interest rates and increase long-term interest rates 
C) to reduce both short-term and long-term interest rates 
D) to increase both short-term and long-term interest rates

Question 15

Rates of inflation in the hundreds or thousands of percent per year are known as

Accepted Answer

A) super inflation. 
B) megainflation. 
C) hyperinflation. 
D) overinflation. 
A) super inflation. 
B) megainflation. 
C) hyperinflation. 
D) overinflation.

Question 16

Under which chair did the Fed implement the policy of inflation targeting?

Accepted Answer

A) Volcker 
B) Bernanke 
C) Greenspan 
D) Geithner 
A) Volcker 
B) Bernanke 
C) Greenspan 
D) Geithner

Question 17

Which of the following is an intermediate target?

Accepted Answer

A) M2 
B) reserves 
C) unemployment rate 
D) inflation rate 
A) M2 
B) reserves 
C) unemployment rate 
D) inflation rate

Question 18

Defensive open market transactions

Accepted Answer

A) are aimed at achieving changes in monetary policy. 
B) are used much less frequently than dynamic open market transactions. 
C) are used to offset disturbances to the supply or demand for reserves. 
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 less frequently than dynamic open market transactions. 
C) are used to offset disturbances to the supply or demand for reserves. 
D) make it easy to deduce the Fed's intentions for monetary policy.

Question 19

A rising dollar makes U.S. goods

Accepted Answer

A) more expensive abroad and increases the volume of U.S. exports. 
B) less expensive abroad and increases the volume of U.S. exports. 
C) less expensive abroad and decreases the volume of U.S. exports. 
D) more expensive abroad and decreases the volume of U.S. exports. 
A) more expensive abroad and increases the volume of U.S. exports. 
B) less expensive abroad and increases the volume of U.S. exports. 
C) less expensive abroad and decreases the volume of U.S. exports. 
D) more expensive abroad and decreases the volume of U.S. exports.

Question 20

An open market purchase

Accepted Answer

A) increases the monetary base. 
B) decreases the monetary base. 
C) increases the federal funds rate. 
D) is another name for a discount loan. 
A) increases the monetary base. 
B) decreases the monetary base. 
C) increases the federal funds rate. 
D) is another name for a discount loan.

The Fed can implement open market operations

The Fed's goal of interest rate stability

Discount loans intended for banks that are not financially healthy are called

Inflation is an economic problem because it

In order to increase its target for the federal funds rate, the Fed would normally

Which of the following is an operating target?

High employment spurs economic growth because high employment

Which of the following is considered to be a goal of monetary policy?

As a result of an open market purchase, bank reserves

The original Federal Reserve Act

Intermediate targets are

The unemployment that is caused by changes in the economy, such as shifts in manufacturing techniques, increased use of computers and electronic machines, and increases in the production of services instead of goods, is called

In 2006, the Bank of Japan adopted a policy framework focusing on

What was the goal of Operation Twist?

Rates of inflation in the hundreds or thousands of percent per year are known as

Under which chair did the Fed implement the policy of inflation targeting?

Which of the following is an intermediate target?

Defensive open market transactions

A rising dollar makes U.S. goods

An open market purchase

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 can implement open market operations

The Fed's goal of interest rate stability

Discount loans intended for banks that are not financially healthy are called

Inflation is an economic problem because it

In order to increase its target for the federal funds rate, the Fed would normally

Which of the following is an operating target?

High employment spurs economic growth because high employment

Which of the following is considered to be a goal of monetary policy?

As a result of an open market purchase, bank reserves

The original Federal Reserve Act

Intermediate targets are

The unemployment that is caused by changes in the economy, such as shifts in manufacturing techniques, increased use of computers and electronic machines, and increases in the production of services instead of goods, is called

In 2006, the Bank of Japan adopted a policy framework focusing on

What was the goal of Operation Twist?

Rates of inflation in the hundreds or thousands of percent per year are known as

Under which chair did the Fed implement the policy of inflation targeting?

Which of the following is an intermediate target?

Defensive open market transactions

A rising dollar makes U.S. goods

An open market purchase

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