Question 1

Describe the temporary lending facilities that the Fed set up during the Financial Crisis of 2007-2009.

Accepted Answer

Under the primary dealer credit facility

Question 2

How does the interest paid on reserves set a floor for the federal funds rate?

Accepted Answer

If the federal funds rate was lower than

Question 3

Describe the three types of unemployment?

Accepted Answer

The three types of unemployment are fric

Question 4

The Fed's monetary policy tools

Accepted Answer

A) have proven to be of little value in helping the Fed to achieve its monetary policy goals. 
B) have allowed the Fed to achieve its monetary policy goals directly. 
C) have allowed the Fed to achieve its monetary policy goals indirectly. 
D) are no longer as effective in achieving its monetary policy goals, due to restrictive legislation passed by Congress in the 1990s. 
A) have proven to be of little value in helping the Fed to achieve its monetary policy goals. 
B) have allowed the Fed to achieve its monetary policy goals directly. 
C) have allowed the Fed to achieve its monetary policy goals indirectly. 
D) are no longer as effective in achieving its monetary policy goals, due to restrictive legislation passed by Congress in the 1990s.

Question 5

The FOMC states its overall objectives for interest rates in

Accepted Answer

A) the Governors' Order. 
B) the Policy Directive. 
C) the Federal Reserve Bulletin. 
D) the Chairman's Order. 
A) the Governors' Order. 
B) the Policy Directive. 
C) the Federal Reserve Bulletin. 
D) the Chairman's Order.

Question 6

Which of the following best describes a policy of inflation targeting?

Accepted Answer

A) It's an inflexible rule that requires the central bank to always achieve a specified inflation rate. 
B) It allows monetary policy to focus on inflation and inflation forecasts except in the case of severe recession. 
C) It allows the central bank the flexibility of setting different inflation targets each year. 
D) It requires central banks to target current inflation rather than inflation forecasts. 
A) It's an inflexible rule that requires the central bank to always achieve a specified inflation rate. 
B) It allows monetary policy to focus on inflation and inflation forecasts except in the case of severe recession. 
C) It allows the central bank the flexibility of setting different inflation targets each year. 
D) It requires central banks to target current inflation rather than inflation forecasts.

Question 7

Which central bank has its exchange rate as a focus of its monetary policy?

Accepted Answer

A) Bank of Canada 
B) Bank of England 
C) European Central Bank 
D) Federal Reserve 
A) Bank of Canada 
B) Bank of England 
C) European Central Bank 
D) Federal Reserve

Question 8

The discount window is

Accepted Answer

A) another name for the discount rate. 
B) the means by which the Fed makes discount loans to banks. 
C) the spread between the discount rate and the T-bill rate. 
D) the period each month during which banks are allowed to apply for discount loans. 
A) another name for the discount rate. 
B) the means by which the Fed makes discount loans to banks. 
C) the spread between the discount rate and the T-bill rate. 
D) the period each month during which banks are allowed to apply for discount loans.

Question 9

Open market operations

Accepted Answer

A) lack flexibility because only very small purchases or sales may be carried out in any given month. 
B) lack flexibility because open market purchases cannot easily be offset by subsequent open market sales. 
C) are more flexible than other policy tools. 
D) may be carried out only on the third Friday of each month. 
A) lack flexibility because only very small purchases or sales may be carried out in any given month. 
B) lack flexibility because open market purchases cannot easily be offset by subsequent open market sales. 
C) are more flexible than other policy tools. 
D) may be carried out only on the third Friday of each month.

Question 10

What was the approximate peak amount of borrowing from the Fed during the Financial Crisis of 2007-2009?

Accepted Answer

A) $2 billion 
B) $100 billion 
C) $270 billion 
D) $1 trillion 
A) $2 billion 
B) $100 billion 
C) $270 billion 
D) $1 trillion

Question 11

Which of the following statements concerning seasonal credit is true?

Accepted Answer

A) It tends to have a lower interest rate than federal funds. 
B) It has become increasingly more important in recent years. 
C) Only firms receiving secondary credit are eligible to receive seasonal credit. 
D) Improvements in credit markets have reduced the need for a seasonal credit facility. 
A) It tends to have a lower interest rate than federal funds. 
B) It has become increasingly more important in recent years. 
C) Only firms receiving secondary credit are eligible to receive seasonal credit. 
D) Improvements in credit markets have reduced the need for a seasonal credit facility.

Question 12

Which of the following statements is correct?

Accepted Answer

A) Open market purchases are expansionary and open market sales are contractionary. 
B) Open market purchases are contractionary and open market sales are expansionary. 
C) Both open market purchases and open market sales are expansionary. 
D) Both open market purchases and open market sales are contractionary. 
A) Open market purchases are expansionary and open market sales are contractionary. 
B) Open market purchases are contractionary and open market sales are expansionary. 
C) Both open market purchases and open market sales are expansionary. 
D) Both open market purchases and open market sales are contractionary.

Question 13

The impact lag facing the Fed is

Accepted Answer

A) the delay before open market operations are able to affect the monetary base. 
B) the delay before the Fed's announcement of a new policy has an impact on the decisions of the public. 
C) the time required for monetary policy changes to affect output, employment, and prices. 
D) the delay before the impact of a recession on output and prices becomes clear to the Fed. 
A) the delay before open market operations are able to affect the monetary base. 
B) the delay before the Fed's announcement of a new policy has an impact on the decisions of the public. 
C) the time required for monetary policy changes to affect output, employment, and prices. 
D) the delay before the impact of a recession on output and prices becomes clear to the Fed.

Question 14

The Fed's inability to instantaneously observe changes in inflation and economic growth result in

Accepted Answer

A) information lag. 
B) impact lag. 
C) policy lag. 
D) jet lag. 
A) information lag. 
B) impact lag. 
C) policy lag. 
D) jet lag.

Question 15

Which of the following statements is correct?

Accepted Answer

A) The volume of open market operations is determined jointly by the actions of the public, banks, and the Fed. 
B) The volume of open market operations is determined jointly by the actions of banks and the Fed. 
C) The volume of open market operations is determined jointly by the actions of the public and the Fed. 
D) The volume of open market operations is determined solely by the Fed. 
A) The volume of open market operations is determined jointly by the actions of the public, banks, and the Fed. 
B) The volume of open market operations is determined jointly by the actions of banks and the Fed. 
C) The volume of open market operations is determined jointly by the actions of the public and the Fed. 
D) The volume of open market operations is determined solely by the Fed.

Question 16

Primary credit is only a backup source of funds for health banks since

Accepted Answer

A) the primary credit rate is set above the federal funds rate. 
B) restrictions as to its use limit its benefits. 
C) the secondary credit rate pays 0.5% more. 
D) banks must seek funds from other sources prior to requesting a discount loan. 
A) the primary credit rate is set above the federal funds rate. 
B) restrictions as to its use limit its benefits. 
C) the secondary credit rate pays 0.5% more. 
D) banks must seek funds from other sources prior to requesting a discount loan.

Question 17

Under which circumstance is the Fed most likely to carry out a defensive open market operation?

Accepted Answer

A) to prevent an increase in inflation 
B) if a snowstorm results in a delay in check clearing, resulting in an increase in the Federal Reserve float 
C) to defend the value of the U.S. dollar on the foreign exchange market 
D) to prevent the negative impact of a demand shock 
A) to prevent an increase in inflation 
B) if a snowstorm results in a delay in check clearing, resulting in an increase in the Federal Reserve float 
C) to defend the value of the U.S. dollar on the foreign exchange market 
D) to prevent the negative impact of a demand shock

Question 18

Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%. Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this.

Accepted Answer

The Fed will conduct open mark

Question 19

If the FOMC's directive indicates a change in monetary policy, the account manager at the Fed's Open Market Trading Desk must

Accepted Answer

A) design dynamic open market operations. 
B) design defensive open market operations. 
C) seek approval of the change from the Secretary of the Treasury. 
D) seek approval of the change from a majority of the presidents of the Federal Reserve district banks. 
A) design dynamic open market operations. 
B) design defensive open market operations. 
C) seek approval of the change from the Secretary of the Treasury. 
D) seek approval of the change from a majority of the presidents of the Federal Reserve district banks.

Question 20

Which types of unemployment still occur even when the economy is considered to be operating at full employment?

Accepted Answer

At full employment,

Describe the temporary lending facilities that the Fed set up during the Financial Crisis of 2007-2009.

How does the interest paid on reserves set a floor for the federal funds rate?

Describe the three types of unemployment?

The Fed's monetary policy tools

The FOMC states its overall objectives for interest rates in

Which of the following best describes a policy of inflation targeting?

Which central bank has its exchange rate as a focus of its monetary policy?

The discount window is

Open market operations

What was the approximate peak amount of borrowing from the Fed during the Financial Crisis of 2007-2009?

Which of the following statements concerning seasonal credit is true?

Which of the following statements is correct?

The impact lag facing the Fed is

The Fed's inability to instantaneously observe changes in inflation and economic growth result in

Which of the following statements is correct?

Primary credit is only a backup source of funds for health banks since

Under which circumstance is the Fed most likely to carry out a defensive open market operation?

Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%. Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this.

If the FOMC's directive indicates a change in monetary policy, the account manager at the Fed's Open Market Trading Desk must

Which types of unemployment still occur even when the economy is considered to be operating at full employment?

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

Describe the temporary lending facilities that the Fed set up during the Financial Crisis of 2007-2009.

How does the interest paid on reserves set a floor for the federal funds rate?

Describe the three types of unemployment?

The Fed's monetary policy tools

The FOMC states its overall objectives for interest rates in

Which of the following best describes a policy of inflation targeting?

Which central bank has its exchange rate as a focus of its monetary policy?

The discount window is

Open market operations

What was the approximate peak amount of borrowing from the Fed during the Financial Crisis of 2007-2009?

Which of the following statements concerning seasonal credit is true?

Which of the following statements is correct?

The impact lag facing the Fed is

The Fed's inability to instantaneously observe changes in inflation and economic growth result in

Which of the following statements is correct?

Primary credit is only a backup source of funds for health banks since

Under which circumstance is the Fed most likely to carry out a defensive open market operation?

Suppose the current federal funds rate is 0.25% and the Fed chooses to raise its target to 0.5%. Make use of a graph of the federal funds market to show how it will use open market operations to accomplish this.

If the FOMC's directive indicates a change in monetary policy, the account manager at the Fed's Open Market Trading Desk must

Which types of unemployment still occur even when the economy is considered to be operating at full employment?

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