Question 1

Instrument 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 2

Unemployment resulting from a mismatch of workers' skills and job requirements is called

Accepted Answer

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

Question 3

The Federal Open Market Committee's "balance of risks" is an assessment of whether,in the future,its primary concern will be

Accepted Answer

A) higher exchange rates or higher unemployment. 
B) higher inflation or a stronger economy. 
C) higher inflation or a weaker economy. 
D) lower inflation or a stronger economy. 
A) higher exchange rates or higher unemployment. 
B) higher inflation or a stronger economy. 
C) higher inflation or a weaker economy. 
D) lower inflation or a stronger economy.

Question 4

The research document given to the Federal Open Market Committee that contains forecasts of the money aggregates conditional on different monetary policy stances is called the

Accepted Answer

A) beige book. 
B) green book. 
C) blue book. 
D) black book. 
A) beige book. 
B) green book. 
C) blue book. 
D) black book.

Question 5

Members of the Executive Board of the European System of Central Banks are appointed to ________ year,nonrenewable terms.

Accepted Answer

A) four 
B) eight 
C) ten 
D) fourteen 
A) four 
B) eight 
C) ten 
D) fourteen

Question 6

While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy,its critics contend that its independence is

Accepted Answer

A) limited by the Ministry of Finance's veto power over a portion of its budget. 
B) too great because it need not pursue a policy of price stability even if that is the popular will of the people. 
C) too great since the Ministry of Finance no longer has veto power over the bank's budget. 
D) limited since the Ministry of Finance can dismiss senior bank officials. 
A) limited by the Ministry of Finance's veto power over a portion of its budget. 
B) too great because it need not pursue a policy of price stability even if that is the popular will of the people. 
C) too great since the Ministry of Finance no longer has veto power over the bank's budget. 
D) limited since the Ministry of Finance can dismiss senior bank officials.

Question 7

Which of the following statements comparing the European System of Central Banks and the Federal Reserve System is TRUE?

Accepted Answer

A) The budgets of the Federal Reserve Banks are controlled by the Board of Governors,while the National Central Banks control their own budgets and the budget of the European Central Bank. 
B) The European Central Bank has similar power over the National Central Banks when compared to the level of power the Board of Governors has over the Federal Reserve Banks. 
C) Just like the Federal Reserve System,monetary operations are centralized in the European System of Central Banks with the European Central Bank. 
D) The European Central Bank's involvement in supervision and regulation of financial institutions is comparable to the Board of Governors' involvement. 
A) The budgets of the Federal Reserve Banks are controlled by the Board of Governors,while the National Central Banks control their own budgets and the budget of the European Central Bank. 
B) The European Central Bank has similar power over the National Central Banks when compared to the level of power the Board of Governors has over the Federal Reserve Banks. 
C) Just like the Federal Reserve System,monetary operations are centralized in the European System of Central Banks with the European Central Bank. 
D) The European Central Bank's involvement in supervision and regulation of financial institutions is comparable to the Board of Governors' involvement.

Question 8

The Federal Open Market Committee consists of the

Accepted Answer

A) five senior members of the seven-member Board of Governors. 
B) seven members of the Board of Governors and seven presidents of the regional Fed banks. 
C) seven members of the Board of Governors and five presidents of the regional Fed banks. 
D) twelve regional Fed bank presidents and the chairman of the Board of Governors. 
A) five senior members of the seven-member Board of Governors. 
B) seven members of the Board of Governors and seven presidents of the regional Fed banks. 
C) seven members of the Board of Governors and five presidents of the regional Fed banks. 
D) twelve regional Fed bank presidents and the chairman of the Board of Governors.

Question 9

Which of the following functions are not performed by any of the twelve regional Federal Reserve Banks?

Accepted Answer

A) Check clearing 
B) Conducting economic research 
C) Setting interest rates payable on time deposits 
D) Issuing new currency 
A) Check clearing 
B) Conducting economic research 
C) Setting interest rates payable on time deposits 
D) Issuing new currency

Question 10

The mandate for the monetary policy goals that has been given to the European Central Bank is an example of a ________ mandate.

Accepted Answer

A) primary 
B) dual 
C) secondary 
D) hierarchical 
A) primary 
B) dual 
C) secondary 
D) hierarchical

Question 11

The Second 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) is considered to be the primary cause of the bank panic of 1907. 
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) is considered to be the primary cause of the bank panic of 1907. 
D) None of the above.

Question 12

The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________ term.

Accepted Answer

A) one-year 
B) two-year 
C) four-year 
D) eight-year 
A) one-year 
B) two-year 
C) four-year 
D) eight-year

Question 13

The trend in recent years is that more and more governments

Accepted Answer

A) have been granting greater independence to their central banks. 
B) have been reducing the independence of their central banks to make them more accountable for poor economic performance. 
C) have mandated that their central banks focus on controlling inflation. 
D) have required their central banks to cooperate more with their Ministers of Finance. 
A) have been granting greater independence to their central banks. 
B) have been reducing the independence of their central banks to make them more accountable for poor economic performance. 
C) have mandated that their central banks focus on controlling inflation. 
D) have required their central banks to cooperate more with their Ministers of Finance.

Question 14

An important function of the regional Federal Reserve Banks is

Accepted Answer

A) setting reserve requirements. 
B) clearing checks. 
C) determining monetary policy. 
D) setting margin requirements. 
A) setting reserve requirements. 
B) clearing checks. 
C) determining monetary policy. 
D) setting margin requirements.

Question 15

A central feature of monetary policy strategies in all countries is the use of a nominal anchor,which is a nominal variable that monetary policymakers use as an

Accepted Answer

A) operating target,such as the federal funds interest rate. 
B) intermediate target,such as the federal funds interest rate. 
C) intermediate target to achieve an ultimate goal such as price stability. 
D) operating target to achieve an ultimate goal such as exchange rate stability. 
A) operating target,such as the federal funds interest rate. 
B) intermediate target,such as the federal funds interest rate. 
C) intermediate target to achieve an ultimate goal such as price stability. 
D) operating target to achieve an ultimate goal such as exchange rate stability.

Question 16

Make the case for and against an independent Federal Reserve.

Accepted Answer

Case for: 
1.An independent Federal Rese

Question 17

The political business cycle refers to the phenomenon that just before elections,politicians enact ________ policies.After the elections,the bad effects of these policies (for example,________ )have to be counteracted with ________ policies.

Accepted Answer

A) expansionary; higher unemployment; contractionary 
B) expansionary; a higher inflation rate; contractionary 
C) contractionary; higher unemployment; expansionary 
D) contractionary; a higher inflation rate; expansionary 
A) expansionary; higher unemployment; contractionary 
B) expansionary; a higher inflation rate; contractionary 
C) contractionary; higher unemployment; expansionary 
D) contractionary; a higher inflation rate; expansionary

Question 18

Each Federal Reserve bank has nine directors.Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors.

Accepted Answer

A) three; six 
B) four; five 
C) five; four 
D) six; three 
A) three; six 
B) four; five 
C) five; four 
D) six; three

Question 19

The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the

Accepted Answer

A) Board of Governors. 
B) chairman of the Board of Governors. 
C) Federal Open Market Committee. 
D) Open Market Advisory Council 
A) Board of Governors. 
B) chairman of the Board of Governors. 
C) Federal Open Market Committee. 
D) Open Market Advisory Council

Question 20

The Governing Council usually meets ________ times a year.

Accepted Answer

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

Exam 13: Central Banks and the Federal Reserve System

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

Unemployment resulting from a mismatch of workers' skills and job requirements is called

The Federal Open Market Committee's "balance of risks" is an assessment of whether,in the future,its primary concern will be

The research document given to the Federal Open Market Committee that contains forecasts of the money aggregates conditional on different monetary policy stances is called the

Members of the Executive Board of the European System of Central Banks are appointed to ________ year,nonrenewable terms.

While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy,its critics contend that its independence is

Which of the following statements comparing the European System of Central Banks and the Federal Reserve System is TRUE?

The Federal Open Market Committee consists of the

Which of the following functions are not performed by any of the twelve regional Federal Reserve Banks?

The mandate for the monetary policy goals that has been given to the European Central Bank is an example of a ________ mandate.

The Second Bank of the United States

The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________ term.

The trend in recent years is that more and more governments

An important function of the regional Federal Reserve Banks is

A central feature of monetary policy strategies in all countries is the use of a nominal anchor,which is a nominal variable that monetary policymakers use as an

Make the case for and against an independent Federal Reserve.

The political business cycle refers to the phenomenon that just before elections,politicians enact ________ policies.After the elections,the bad effects of these policies (for example,________ )have to be counteracted with ________ policies.

Each Federal Reserve bank has nine directors.Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors.

The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the

The Governing Council usually meets ________ times a year.

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

Filters

Instrument independence is the ability of to set monetary policy .

The political business cycle refers to the phenomenon that just before elections,politicians enact policies.After the elections,the bad effects of these policies (for example, )have to be counteracted with policies.

Each Federal Reserve bank has nine directors.Of these are appointed by the member banks and are appointed by the Board of Governors.