Question 1

High unemployment is undesirable because it

Accepted Answer

A) results in a loss of output. 
B) always increases inflation. 
C) always increases interest rates. 
D) reduces idle resources. 
A) results in a loss of output. 
B) always increases inflation. 
C) always increases interest rates. 
D) reduces idle resources.

Question 2

While the discount rate is "established" by the regional Federal Reserve Banks,in truth,the rate is determined by

Accepted Answer

A) Congress. 
B) the president of the United States. 
C) the Senate. 
D) the Board of Governors. 
A) Congress. 
B) the president of the United States. 
C) the Senate. 
D) the Board of Governors.

Question 3

Even if the Fed could completely control the money supply,monetary policy would have critics because

Accepted Answer

A) the Fed is asked to achieve many goals,some of which are incompatible with others. 
B) the Fed's goals do not include high employment,making labor unions a critic of the Fed. 
C) the Fed's primary goal is exchange rate stability,causing it to ignore domestic economic conditions. 
D) it is required to keep Treasury security prices high. 
A) the Fed is asked to achieve many goals,some of which are incompatible with others. 
B) the Fed's goals do not include high employment,making labor unions a critic of the Fed. 
C) the Fed's primary goal is exchange rate stability,causing it to ignore domestic economic conditions. 
D) it is required to keep Treasury security prices high.

Question 4

In the Governing Council,the decision of what policy to implement is made by

Accepted Answer

A) majority vote of the Executive Board members. 
B) majority vote of the heads of the National Banks. 
C) consensus. 
D) majority vote of all members of the Governing Council. 
A) majority vote of the Executive Board members. 
B) majority vote of the heads of the National Banks. 
C) consensus. 
D) majority vote of all members of the Governing Council.

Question 5

Prior to 1980,member banks left the Federal Reserve System due to

Accepted Answer

A) the high cost of discount loans. 
B) the high cost of required reserves. 
C) a desire to avoid interest rate regulations. 
D) a desire to avoid credit controls. 
A) the high cost of discount loans. 
B) the high cost of required reserves. 
C) a desire to avoid interest rate regulations. 
D) a desire to avoid credit controls.

Question 6

There are ________ members of the Board of Governors of the Federal Reserve System.

Accepted Answer

A) 5 
B) 7 
C) 12 
D) 19 
A) 5 
B) 7 
C) 12 
D) 19

Question 7

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

Accepted Answer

A) concern over declining Fed membership. 
B) belief that all banking regulations should be eliminated. 
C) belief that interest rate ceilings were too high. 
D) belief that depositors had to become more knowledgeable of banking operations. 
A) concern over declining Fed membership. 
B) belief that all banking regulations should be eliminated. 
C) belief that interest rate ceilings were too high. 
D) belief that depositors had to become more knowledgeable of banking operations.

Question 8

As of the beginning of the year 2009,there are ________ countries that have representation on the Governing Council.

Accepted Answer

A) six 
B) eight 
C) ten 
D) twelve 
A) six 
B) eight 
C) ten 
D) twelve

Question 9

Supply-side economic policies seek to

Accepted Answer

A) raise interest rates through contractionary monetary policy. 
B) increase federal government expenditures. 
C) increase consumption expenditures by increasing taxes. 
D) increase saving and investment using tax incentives. 
A) raise interest rates through contractionary monetary policy. 
B) increase federal government expenditures. 
C) increase consumption expenditures by increasing taxes. 
D) increase saving and investment using tax incentives.

Question 10

Explain two concepts of central bank independence.Is the Fed politically independent? Why do economists think central bank independence is important?

Accepted Answer

Instrument independence is the ability o

Question 11

The ability of a central bank to set monetary policy goals is

Accepted Answer

A) political independence. 
B) goal independence. 
C) policy independence. 
D) instrument independence. 
A) political independence. 
B) goal independence. 
C) policy independence. 
D) instrument independence.

Question 12

Members of the Board of Governors are

Accepted Answer

A) chosen by the Federal Reserve Bank presidents. 
B) appointed by the newly elected president of the United States,as are cabinet positions. 
C) appointed by the president of the United States and confirmed by the Senate as members resign. 
D) never allowed to serve more than 7-year terms. 
A) chosen by the Federal Reserve Bank presidents. 
B) appointed by the newly elected president of the United States,as are cabinet positions. 
C) appointed by the president of the United States and confirmed by the Senate as members resign. 
D) never allowed to serve more than 7-year terms.

Question 13

What makes the Federal Reserve so unique compared to other central banks around the world is its

Accepted Answer

A) centralized structure. 
B) decentralized structure. 
C) regulatory functions. 
D) monetary policy functions. 
A) centralized structure. 
B) decentralized structure. 
C) regulatory functions. 
D) monetary policy functions.

Question 14

Which set of goals can,at times,conflict in the short run?

Accepted Answer

A) High employment and economic growth. 
B) Interest rate stability and financial market stability. 
C) High employment and price level stability. 
D) Exchange rate stability and financial market stability. 
A) High employment and economic growth. 
B) Interest rate stability and financial market stability. 
C) High employment and price level stability. 
D) Exchange rate stability and financial market stability.

Question 15

Which of the following is an entity of the Federal Reserve System?

Accepted Answer

A) The U.S.Treasury Secretary 
B) The FOMC 
C) The Comptroller of the Currency 
D) The FDIC 
A) The U.S.Treasury Secretary 
B) The FOMC 
C) The Comptroller of the Currency 
D) The FDIC

Question 16

Goal independence is the ability of ________ to set monetary policy ________.

Accepted Answer

A) the central bank; goals 
B) Congress; goals 
C) Congress; instruments 
D) the central bank; instruments 
A) the central bank; goals 
B) Congress; goals 
C) Congress; instruments 
D) the central bank; instruments

Question 17

The Federal Reserve Bank of ________ plays a special role in the Federal Reserve System because it houses the open market desk.

Accepted Answer

A) Boston 
B) New York 
C) Chicago 
D) San Francisco 
A) Boston 
B) New York 
C) Chicago 
D) San Francisco

Question 18

Each governor on the Board of Governors can serve

Accepted Answer

A) only one nonrenewable fourteen-year term. 
B) one full nonrenewable fourteen-year term plus part of another term. 
C) only one nonrenewable eight-year term. 
D) one full nonrenewable eight-year term plus part of another term. 
A) only one nonrenewable fourteen-year term. 
B) one full nonrenewable fourteen-year term plus part of another term. 
C) only one nonrenewable eight-year term. 
D) one full nonrenewable eight-year term plus part of another term.

Question 19

The time-inconsistency problem in monetary policy can occur when the central bank conducts policy

Accepted Answer

A) using a nominal anchor. 
B) using a strict and inflexible rule. 
C) on a discretionary,day-by-day basis. 
D) using a flexible,discretionary rule. 
A) using a nominal anchor. 
B) using a strict and inflexible rule. 
C) on a discretionary,day-by-day basis. 
D) using a flexible,discretionary rule.

Question 20

The Federal Reserve System was created to

Accepted Answer

A) make it easier to finance budget deficits. 
B) promote financial market stability. 
C) lower the unemployment rate. 
D) promote rapid economic growth. 
A) make it easier to finance budget deficits. 
B) promote financial market stability. 
C) lower the unemployment rate. 
D) promote rapid economic growth.

Exam 13: Central Banks and the Federal Reserve System

High unemployment is undesirable because it

While the discount rate is "established" by the regional Federal Reserve Banks,in truth,the rate is determined by

Even if the Fed could completely control the money supply,monetary policy would have critics because

In the Governing Council,the decision of what policy to implement is made by

Prior to 1980,member banks left the Federal Reserve System due to

There are ________ members of the Board of Governors of the Federal Reserve System.

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

As of the beginning of the year 2009,there are ________ countries that have representation on the Governing Council.

Supply-side economic policies seek to

Explain two concepts of central bank independence.Is the Fed politically independent? Why do economists think central bank independence is important?

The ability of a central bank to set monetary policy goals is

Members of the Board of Governors are

What makes the Federal Reserve so unique compared to other central banks around the world is its

Which set of goals can,at times,conflict in the short run?

Which of the following is an entity of the Federal Reserve System?

Goal independence is the ability of ________ to set monetary policy ________.

The Federal Reserve Bank of ________ plays a special role in the Federal Reserve System because it houses the open market desk.

Each governor on the Board of Governors can serve

The time-inconsistency problem in monetary policy can occur when the central bank conducts policy

The Federal Reserve System was created to

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises and the Subprime Meltdown

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

The Money Supply Process

Tools for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

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Goal independence is the ability of to set monetary policy .