Question 1

Under the European System of Central Banks,the Governing Council is similar in structure to the ________ of the Federal Reserve System.

Accepted Answer

A) Board of Governors 
B) Federal Open Market Committee 
C) Federal Reserve Banks 
D) Federal Advisory Council 
A) Board of Governors 
B) Federal Open Market Committee 
C) Federal Reserve Banks 
D) Federal Advisory Council

Question 2

Explain the similarities and differences between the European System of Central Banks and the Federal Reserve System.

Accepted Answer

The similarities between the two are in

Question 3

The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed

Accepted Answer

A) is supportive of congressional attempts to limit the central bank's autonomy. 
B) is so secretive about the conduct of future monetary policy. 
C) sought less control over banks in the 1980s. 
D) is willing to take on powerful groups that may threaten its autonomy. 
A) is supportive of congressional attempts to limit the central bank's autonomy. 
B) is so secretive about the conduct of future monetary policy. 
C) sought less control over banks in the 1980s. 
D) is willing to take on powerful groups that may threaten its autonomy.

Question 4

The ability of a central bank to set monetary policy instruments 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 5

The majority of members of the Federal Open Market Committee are

Accepted Answer

A) Federal Reserve Bank presidents. 
B) members of the Federal Advisory Council. 
C) presidents of member banks. 
D) the seven Federal Reserve governors. 
A) Federal Reserve Bank presidents. 
B) members of the Federal Advisory Council. 
C) presidents of member banks. 
D) the seven Federal Reserve governors.

Question 6

The First Bank of the United States

Accepted Answer

A) was disbanded in 1811 when its charter was not renewed. 
B) had its charter renewal vetoed in 1832. 
C) was fundamental in helping the Federal Government finance the War of 1812. 
D) None of the above. 
A) was disbanded in 1811 when its charter was not renewed. 
B) had its charter renewal vetoed in 1832. 
C) was fundamental in helping the Federal Government finance the War of 1812. 
D) None of the above.

Question 7

Under the European System of Central Banks,the Executive Board is similar in structure to the ________ of the Federal Reserve System.

Accepted Answer

A) Board of Governors 
B) Federal Open Market Committee 
C) Federal Reserve Banks 
D) Federal Advisory Council 
A) Board of Governors 
B) Federal Open Market Committee 
C) Federal Reserve Banks 
D) Federal Advisory Council

Question 8

Monetary policy is considered time-inconsistent because

Accepted Answer

A) of the lag times associated with the implementation of monetary policy and its effect on the economy. 
B) policymakers are tempted to pursue discretionary policy that is more contractionary in the short run. 
C) policymakers are tempted to pursue discretionary policy that is more expansionary in the short run. 
D) of the lag times associated with the recognition of a potential economic problem and the implementation of monetary policy. 
A) of the lag times associated with the implementation of monetary policy and its effect on the economy. 
B) policymakers are tempted to pursue discretionary policy that is more contractionary in the short run. 
C) policymakers are tempted to pursue discretionary policy that is more expansionary in the short run. 
D) of the lag times associated with the recognition of a potential economic problem and the implementation of monetary policy.

Question 9

The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee?

Accepted Answer

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

Question 10

The primary goal of the European Central Bank is

Accepted Answer

A) price stability. 
B) exchange rate stability. 
C) interest rate stability. 
D) high employment. 
A) price stability. 
B) exchange rate stability. 
C) interest rate stability. 
D) high employment.

Question 11

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually.

Accepted Answer

A) four 
B) five 
C) six 
D) eight 
A) four 
B) five 
C) six 
D) eight

Question 12

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize

Accepted Answer

A) the public's welfare. 
B) profits. 
C) its own welfare. 
D) conflict with the executive and legislative branches of government. 
A) the public's welfare. 
B) profits. 
C) its own welfare. 
D) conflict with the executive and legislative branches of government.

Question 13

The ________ problem of discretionary policy arises because economic behavior is influenced by what firms and people expect the monetary authorities to do in the future.

Accepted Answer

A) moral hazard 
B) time-inconsistency 
C) nominal-anchor 
D) rational-expectation 
A) moral hazard 
B) time-inconsistency 
C) nominal-anchor 
D) rational-expectation

Question 14

All ________ are required to be members of the Fed.

Accepted Answer

A) state chartered banks 
B) nationally chartered banks 
C) banks with assets less than $100 million 
D) banks with assets less than $500 million 
A) state chartered banks 
B) nationally chartered banks 
C) banks with assets less than $100 million 
D) banks with assets less than $500 million

Question 15

Recent research indicates that inflation performance (low inflation)has been found to be best in countries with

Accepted Answer

A) the most independent central banks. 
B) political control of monetary policy. 
C) money financing of budget deficits. 
D) a policy of always keeping interest rates low. 
A) the most independent central banks. 
B) political control of monetary policy. 
C) money financing of budget deficits. 
D) a policy of always keeping interest rates low.

Question 16

The oldest central bank,having been founded in 1694,is the

Accepted Answer

A) Bank of England. 
B) Deutsche Bundesbank. 
C) Bank of Japan. 
D) Federal Reserve System. 
A) Bank of England. 
B) Deutsche Bundesbank. 
C) Bank of Japan. 
D) Federal Reserve System.

Question 17

The central bank which is generally regarded as the most independent in the world because its charter cannot be changed by legislation is the

Accepted Answer

A) Bank of England. 
B) Bank of Canada. 
C) European Central Bank. 
D) Bank of Japan. 
A) Bank of England. 
B) Bank of Canada. 
C) European Central Bank. 
D) Bank of Japan.

Question 18

The time-inconsistency problem with monetary policy tells us that,if policymakers use discretionary policy,there is a higher probability that the ________ will be higher,compared to policy makers following a behavior rule.

Accepted Answer

A) inflation rate 
B) unemployment rate 
C) interest rate 
D) foreign exchange rate 
A) inflation rate 
B) unemployment rate 
C) interest rate 
D) foreign exchange rate

Question 19

Under the European System of Central Banks,the National Central Banks have the same role as the ________ of the Federal Reserve System.

Accepted Answer

A) Board of Governors 
B) Federal Open Market Committee 
C) Federal Reserve Banks 
D) Federal Advisory Council 
A) Board of Governors 
B) Federal Open Market Committee 
C) Federal Reserve Banks 
D) Federal Advisory Council

Question 20

Explain the time-inconsistency problem.What is the likely outcome of discretionary policy? What are the solutions to the time-inconsistency problem?

Accepted Answer

With policy discretion,policymakers have

Exam 13: Central Banks and the Federal Reserve System

Under the European System of Central Banks,the Governing Council is similar in structure to the ________ of the Federal Reserve System.

Explain the similarities and differences between the European System of Central Banks and the Federal Reserve System.

The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed

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

The majority of members of the Federal Open Market Committee are

The First Bank of the United States

Under the European System of Central Banks,the Executive Board is similar in structure to the ________ of the Federal Reserve System.

Monetary policy is considered time-inconsistent because

The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee?

The primary goal of the European Central Bank is

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually.

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize

The ________ problem of discretionary policy arises because economic behavior is influenced by what firms and people expect the monetary authorities to do in the future.

All ________ are required to be members of the Fed.

Recent research indicates that inflation performance (low inflation)has been found to be best in countries with

The oldest central bank,having been founded in 1694,is the

The central bank which is generally regarded as the most independent in the world because its charter cannot be changed by legislation is the

The time-inconsistency problem with monetary policy tells us that,if policymakers use discretionary policy,there is a higher probability that the ________ will be higher,compared to policy makers following a behavior rule.

Under the European System of Central Banks,the National Central Banks have the same role as the ________ of the Federal Reserve System.

Explain the time-inconsistency problem.What is the likely outcome of discretionary policy? What are the solutions to the time-inconsistency problem?

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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