Question 1

Reserve requirements are set by

Accepted Answer

A) the Secretary of Treasury. 
B) the President. 
C) Congress. 
D) the Fed. 
A) the Secretary of Treasury. 
B) the President. 
C) Congress. 
D) the Fed.

Question 2

The information lag facing the Fed is

Accepted Answer

A) the difficulty of becoming informed quickly of changes in public opinion about which policy goal is most important. 
B) the delay in receiving accurate information about the state of the economy. 
C) the delay in Congress and the President communicating their policy goals for the Fed to act on. 
D) the time required for monetary policy changes to affect output, employment, and prices. 
A) the difficulty of becoming informed quickly of changes in public opinion about which policy goal is most important. 
B) the delay in receiving accurate information about the state of the economy. 
C) the delay in Congress and the President communicating their policy goals for the Fed to act on. 
D) the time required for monetary policy changes to affect output, employment, and prices.

Question 3

Which of the following countries experienced hyperinflation during the 1920s?

Accepted Answer

A) The United States 
B) Canada 
C) Germany 
D) England 
A) The United States 
B) Canada 
C) Germany 
D) England

Question 4

What new policy tools for controlling reserve balances did the Fed introduce during the Financial Crisis of 2007-2009?

Accepted Answer

The Fed began to pay interest on reserve

Question 5

How can the Fed reduce the implicit tax on banks resulting from reserve requirements?

Accepted Answer

A) lowering the discount rate 
B) paying interest on reserves 
C) reducing the federal funds rate 
D) increasing the federal funds rate 
A) lowering the discount rate 
B) paying interest on reserves 
C) reducing the federal funds rate 
D) increasing the federal funds rate

Question 6

The Fed was created

Accepted Answer

A) after financial panics in the late 1800s and early 1900s. 
B) after the stock market crash of 1929. 
C) to help finance government expenditures during World War II. 
D) to help channel funds to the residential mortgage market. 
A) after financial panics in the late 1800s and early 1900s. 
B) after the stock market crash of 1929. 
C) to help finance government expenditures during World War II. 
D) to help channel funds to the residential mortgage market.

Question 7

All of the following arguments are made against inflation targeting EXCEPT

Accepted Answer

A) rigid numerical targets would diminish the flexibility of monetary policy. 
B) the Fed would need to depend on future forecasts of inflation since monetary policy acts with a lag. 
C) the Fed has little influence on inflation. 
D) Holding the Fed accountable for low inflation may make it difficult for elected officials to monitor whether the Fed is supporting good overall economic policy. 
A) rigid numerical targets would diminish the flexibility of monetary policy. 
B) the Fed would need to depend on future forecasts of inflation since monetary policy acts with a lag. 
C) the Fed has little influence on inflation. 
D) Holding the Fed accountable for low inflation may make it difficult for elected officials to monitor whether the Fed is supporting good overall economic policy.

Question 8

All of the following statements about secondary credit are true EXCEPT

Accepted Answer

A) they are temporary, short-term loans to satisfy seasonal requirements. 
B) the secondary credit interest rate is set above the primary credit rate. 
C) it is intended for banks not eligible for primary credit. 
D) borrowers of secondary credit are less financially healthy. 
A) they are temporary, short-term loans to satisfy seasonal requirements. 
B) the secondary credit interest rate is set above the primary credit rate. 
C) it is intended for banks not eligible for primary credit. 
D) borrowers of secondary credit are less financially healthy.

Question 9

What has been the approach of the European Central Bank to monetary targeting?

Accepted Answer

Although the European Central

Question 10

Since 1980, discount loans have been available

Accepted Answer

A) only to member banks of the Federal Reserve System. 
B) only to national banks. 
C) only to state banks. 
D) to all depository institutions. 
A) only to member banks of the Federal Reserve System. 
B) only to national banks. 
C) only to state banks. 
D) to all depository institutions.

Question 11

The inflation gap can best be described as:

Accepted Answer

A) the percentage difference between GDP and its potential 
B) the difference between inflation and its target 
C) the change in the inflation rate from one year to the next 
D) the difference between the inflation rate and the average inflation rate of that of the nations with the 3 lowest inflation rates 
A) the percentage difference between GDP and its potential 
B) the difference between inflation and its target 
C) the change in the inflation rate from one year to the next 
D) the difference between the inflation rate and the average inflation rate of that of the nations with the 3 lowest inflation rates

Question 12

When the staff of the account manager at the Fed's Open Market Trading Desk analyzes forecasts on Treasury deposits and information on the timing of future Treasury sales of securities, what agency does it interact with?

Accepted Answer

A) The Securities and Exchange Commission 
B) The Treasury's Office of Government Finance 
C) The Treasury's Office of Federal Reserve Relations 
D) The Federal Deposit Insurance Corporation 
A) The Securities and Exchange Commission 
B) The Treasury's Office of Government Finance 
C) The Treasury's Office of Federal Reserve Relations 
D) The Federal Deposit Insurance Corporation

Question 13

In 2012, Ben Bernanke expressed which concern about persistently high unemployment?

Accepted Answer

A) It would result in high inflation. 
B) It would result in structural damage to the economy that would last for years. 
C) It would never decline to desired levels. 
D) It would cost him his job. 
A) It would result in high inflation. 
B) It would result in structural damage to the economy that would last for years. 
C) It would never decline to desired levels. 
D) It would cost him his job.

Question 14

Which of the following statements accurately describes the Fed's control of discount policy?

Accepted Answer

A) It controls discount policy more completely than it controls open market operations. 
B) It must abide by discount rates set by Congress. 
C) It controls discount policy less completely than it controls open market operations. 
D) It controls discount policy completely, just as it controls open market operations. 
A) It controls discount policy more completely than it controls open market operations. 
B) It must abide by discount rates set by Congress. 
C) It controls discount policy less completely than it controls open market operations. 
D) It controls discount policy completely, just as it controls open market operations.

Question 15

The Employment Act of 1946 codified the federal government's commitment to

Accepted Answer

A) promote high employment consistent with price stability. 
B) promote high employment irrespective of the effects on price stability. 
C) guarantee a job to every unemployed person. 
D) fine companies that engage in excessive layoffs during recessions. 
A) promote high employment consistent with price stability. 
B) promote high employment irrespective of the effects on price stability. 
C) guarantee a job to every unemployed person. 
D) fine companies that engage in excessive layoffs during recessions.

Question 16

An open market purchase

Accepted Answer

A) decreases the price of Treasury securities and also decreases their yield. 
B) increases the price of Treasury securities and decreases their yield. 
C) increases the price of Treasury securities and also increases their yield. 
D) decreases the price of Treasury securities and increases their yield. 
A) decreases the price of Treasury securities and also decreases their yield. 
B) increases the price of Treasury securities and decreases their yield. 
C) increases the price of Treasury securities and also increases their yield. 
D) decreases the price of Treasury securities and increases their yield.

Question 17

In a matched sale-purchase transaction, the Fed

Accepted Answer

A) buys securities from a dealer and the dealer agrees to buy them back. 
B) sells securities to a dealer and the dealer agrees to sell them back. 
C) buys securities from one dealer and sells the same dollar amount of securities to another dealer. 
D) sells securities to one dealer and buys the same dollar amount of securities from another dealer. 
A) buys securities from a dealer and the dealer agrees to buy them back. 
B) sells securities to a dealer and the dealer agrees to sell them back. 
C) buys securities from one dealer and sells the same dollar amount of securities to another dealer. 
D) sells securities to one dealer and buys the same dollar amount of securities from another dealer.

Question 18

Which of the following interest rates tends to fluctuate the most?

Accepted Answer

A) interest rate on corporate bonds 
B) interest rate on 10-year Treasury bonds 
C) mortgage interest rate 
D) federal funds rate 
A) interest rate on corporate bonds 
B) interest rate on 10-year Treasury bonds 
C) mortgage interest rate 
D) federal funds rate

Question 19

The Open Market Trading Desk is

Accepted Answer

A) another name for the Federal Open Market Committee. 
B) an organization of private traders in government securities. 
C) the area on the floor of the New York Stock Exchange set aside for bond trading. 
D) a group of private securities traders that the Fed has selected to participate in open market operations. 
A) another name for the Federal Open Market Committee. 
B) an organization of private traders in government securities. 
C) the area on the floor of the New York Stock Exchange set aside for bond trading. 
D) a group of private securities traders that the Fed has selected to participate in open market operations.

Question 20

A consequence of the impact lag is that the Fed

Accepted Answer

A) may not know the impact of a change in policy. 
B) might not be able to correct a mistaken policy soon enough. 
C) may not have current information about the state of the economy. 
D) may see the impact of a change in policy on inflation, but not economic growth. 
A) may not know the impact of a change in policy. 
B) might not be able to correct a mistaken policy soon enough. 
C) may not have current information about the state of the economy. 
D) may see the impact of a change in policy on inflation, but not economic growth.

Reserve requirements are set by

The information lag facing the Fed is

Which of the following countries experienced hyperinflation during the 1920s?

What new policy tools for controlling reserve balances did the Fed introduce during the Financial Crisis of 2007-2009?

How can the Fed reduce the implicit tax on banks resulting from reserve requirements?

The Fed was created

All of the following arguments are made against inflation targeting EXCEPT

All of the following statements about secondary credit are true EXCEPT

What has been the approach of the European Central Bank to monetary targeting?

Since 1980, discount loans have been available

The inflation gap can best be described as:

When the staff of the account manager at the Fed's Open Market Trading Desk analyzes forecasts on Treasury deposits and information on the timing of future Treasury sales of securities, what agency does it interact with?

In 2012, Ben Bernanke expressed which concern about persistently high unemployment?

Which of the following statements accurately describes the Fed's control of discount policy?

The Employment Act of 1946 codified the federal government's commitment to

An open market purchase

In a matched sale-purchase transaction, the Fed

Which of the following interest rates tends to fluctuate the most?

The Open Market Trading Desk is

A consequence of the impact lag is that the Fed

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

Reserve requirements are set by

The information lag facing the Fed is

Which of the following countries experienced hyperinflation during the 1920s?

What new policy tools for controlling reserve balances did the Fed introduce during the Financial Crisis of 2007-2009?

How can the Fed reduce the implicit tax on banks resulting from reserve requirements?

The Fed was created

All of the following arguments are made against inflation targeting EXCEPT

All of the following statements about secondary credit are true EXCEPT

What has been the approach of the European Central Bank to monetary targeting?

Since 1980, discount loans have been available

The inflation gap can best be described as:

When the staff of the account manager at the Fed's Open Market Trading Desk analyzes forecasts on Treasury deposits and information on the timing of future Treasury sales of securities, what agency does it interact with?

In 2012, Ben Bernanke expressed which concern about persistently high unemployment?

Which of the following statements accurately describes the Fed's control of discount policy?

The Employment Act of 1946 codified the federal government's commitment to

An open market purchase

In a matched sale-purchase transaction, the Fed

Which of the following interest rates tends to fluctuate the most?

The Open Market Trading Desk is

A consequence of the impact lag is that the Fed

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