Question 1

What role, if any, did the accounting scandals involving some U.S.companies in 2001 and 2002 play in the supply of loans?

Accepted Answer

The accounting scandals potentially play

Question 2

The impact of monetary policy on the exchange rate and net exports is best described as:

Accepted Answer

A) The strongest of all the parts of the transmission mechanism 
B) Modest 
C) Unpredictable 
D) Nonexistent 
A) The strongest of all the parts of the transmission mechanism 
B) Modest 
C) Unpredictable 
D) Nonexistent

Question 3

During most of the 1970s, officials at the Fed:

Accepted Answer

A) Overestimated inflation and underestimated the growth rate of potential GDP 
B) Overestimated the growth rate of potential GDP and underestimated inflation 
C) Underestimated both the growth rate of output and inflation 
D) Overestimated both the growth rate of potential GDP and inflation 
A) Overestimated inflation and underestimated the growth rate of potential GDP 
B) Overestimated the growth rate of potential GDP and underestimated inflation 
C) Underestimated both the growth rate of output and inflation 
D) Overestimated both the growth rate of potential GDP and inflation

Question 4

If central bankers raise the interest rate, the asset-price channel of monetary policy implies:

Accepted Answer

A) Stock prices will decrease 
B) Stock prices will remain the same but bond prices will increase 
C) Bond prices will remain flat 
D) Stock prices will increase and bond prices will remain flat 
A) Stock prices will decrease 
B) Stock prices will remain the same but bond prices will increase 
C) Bond prices will remain flat 
D) Stock prices will increase and bond prices will remain flat

Question 5

Which of the following statements is most correct?

Accepted Answer

A) The use of monetary policy in the U.S.has not changed much since the creation of the Fed 
B) The quantitative impact on output of altering the target federal funds rate has been quite stable 
C) Monetary policymakers operate in an environment with very little uncertainty 
D) Monetary policymakers operate in an environment where change is quite common 
A) The use of monetary policy in the U.S.has not changed much since the creation of the Fed 
B) The quantitative impact on output of altering the target federal funds rate has been quite stable 
C) Monetary policymakers operate in an environment with very little uncertainty 
D) Monetary policymakers operate in an environment where change is quite common

Question 6

Monetary policy in Japan during the 1990s was:

Accepted Answer

A) Highly effective at stemming the recession that occurred 
B) Not used, policymakers preferring fiscal policy 
C) For the most part short-circuited by poor financial institution regulation 
D) Responsible for the recession 
A) Highly effective at stemming the recession that occurred 
B) Not used, policymakers preferring fiscal policy 
C) For the most part short-circuited by poor financial institution regulation 
D) Responsible for the recession

Question 7

All of the following would represent the transmission of monetary policy, except:

Accepted Answer

A) Households altering their spending on durable goods 
B) Income tax rates changing 
C) Firms altering their growth plans 
D) Net exports changing 
A) Households altering their spending on durable goods 
B) Income tax rates changing 
C) Firms altering their growth plans 
D) Net exports changing

Question 8

The high rates of inflation that were experienced in the 1970s could partly be blamed on all of the following except:

Accepted Answer

A) The assumption the economy would continue to grow at the rates that the economy experienced in the 1960s 
B) The Viet Nam war 
C) High oil prices 
D) Slow growth rates of potential GDP during the 1970s 
A) The assumption the economy would continue to grow at the rates that the economy experienced in the 1960s 
B) The Viet Nam war 
C) High oil prices 
D) Slow growth rates of potential GDP during the 1970s

Question 9

Asset-backed securities include:

Accepted Answer

A) Mortgage-backed securities held by government-sponsored enterprises 
B) Car loans and student loans 
C) Credit card debt 
D) All of the answers given are correct 
A) Mortgage-backed securities held by government-sponsored enterprises 
B) Car loans and student loans 
C) Credit card debt 
D) All of the answers given are correct

Question 10

During the 2007-2009 financial crisis, what prevented policy easing from being transmitted as usual to the real economy?

Accepted Answer

Essentially it was the fundamental probl

Question 11

It has been argued that monetary policy reached its limits in Japan during the late 1990s and early 2000s.What fact created this belief?

Accepted Answer

The fact that the overnight lending rate

Question 12

The movement away from bank lending towards asset-backed securities has:

Accepted Answer

A) Increased the importance of the bank-lending channel of monetary policy 
B) Eliminated the bank-lending channel as a mechanism for monetary policy 
C) Decreased the importance of the bank-lending channel 
D) Led the FOMC to abandon interest-rate targets 
A) Increased the importance of the bank-lending channel of monetary policy 
B) Eliminated the bank-lending channel as a mechanism for monetary policy 
C) Decreased the importance of the bank-lending channel 
D) Led the FOMC to abandon interest-rate targets

Question 13

An open market purchase of securities by the central bank from banks will:

Accepted Answer

A) Increase the banks' revenue even if the bank does nothing with the reserves 
B) Induce the banks to make more loans since their revenue will decrease if they do nothing 
C) Decrease the amount of deposits in the banking system 
D) Decrease the banks' willingness and ability to make loans 
A) Increase the banks' revenue even if the bank does nothing with the reserves 
B) Induce the banks to make more loans since their revenue will decrease if they do nothing 
C) Decrease the amount of deposits in the banking system 
D) Decrease the banks' willingness and ability to make loans

Question 14

Monetary policymakers could keep equity and property price bubbles from developing by:

Accepted Answer

A) Raising their interest rate target when they suspect a bubble 
B) Lowering their interest rate target when they suspect a bubble 
C) Expanding the money supply in the economy 
D) Purchasing U.S.treasury securities to drive up their prices 
A) Raising their interest rate target when they suspect a bubble 
B) Lowering their interest rate target when they suspect a bubble 
C) Expanding the money supply in the economy 
D) Purchasing U.S.treasury securities to drive up their prices

Question 15

If the target federal funds rate reaches zero the FOMC:

Accepted Answer

A) Must stop purchasing securities since they cannot lower nominal rates below zero 
B) Would likely shift their focus to purchasing longer-term securities 
C) Would likely raise the required reserve rate 
D) Would likely raise the discount rate 
A) Must stop purchasing securities since they cannot lower nominal rates below zero 
B) Would likely shift their focus to purchasing longer-term securities 
C) Would likely raise the required reserve rate 
D) Would likely raise the discount rate

Question 16

Why is it more correct to say that there may be correlation between high interest rates and the growth rate of output but there is no clear causation?

Accepted Answer

Correlation implies that two variables m

Question 17

Inflation can reduce the true cost of debt, and policymakers lower interest rates to encourage borrowing.Is it a good idea then to always take advantage of lower interest rates to borrow and rely on inflation to reduce the cost of debt and to increase your ability to repay the loan?

Accepted Answer

While this seems like a good strategy it

Question 18

Comparing the banking systems of Japan and the U.S.during the 1990s and early 2000s, one would be likely to say that:

Accepted Answer

A) The U.S.banking system is much shakier than the Japanese banking system 
B) Japanese banks are certainly more tightly regulated from an accounting perspective 
C) The U.S.banking system is much stronger than the Japanese banking system 
D) Monetary policy worked far better in the Japanese banking system during this time frame 
A) The U.S.banking system is much shakier than the Japanese banking system 
B) Japanese banks are certainly more tightly regulated from an accounting perspective 
C) The U.S.banking system is much stronger than the Japanese banking system 
D) Monetary policy worked far better in the Japanese banking system during this time frame

Question 19

Given a firm's liabilities, an increase in interest rates reduces the firm's net worth because:

Accepted Answer

A) Profits will be lower due to higher interest costs 
B) Asset values will increase 
C) The principal amount of the loans will increase 
D) All of the answers given are correct 
A) Profits will be lower due to higher interest costs 
B) Asset values will increase 
C) The principal amount of the loans will increase 
D) All of the answers given are correct

Question 20

Over the past twenty-five years, bank loans as a percentage of total credit:

Accepted Answer

A) Increased from less than sixty percent to over 90 percent 
B) Stayed fairly constant at around eighty percent 
C) Decreased from accounting for virtually all of the credit to less than sixty percent 
D) Dropped from seventy five percent to less than fifty percent 
A) Increased from less than sixty percent to over 90 percent 
B) Stayed fairly constant at around eighty percent 
C) Decreased from accounting for virtually all of the credit to less than sixty percent 
D) Dropped from seventy five percent to less than fifty percent

Exam 23: Modern Monetary Policy and the Challenges Facing Central Bankers

What role, if any, did the accounting scandals involving some U.S.companies in 2001 and 2002 play in the supply of loans?

The impact of monetary policy on the exchange rate and net exports is best described as:

During most of the 1970s, officials at the Fed:

If central bankers raise the interest rate, the asset-price channel of monetary policy implies:

Which of the following statements is most correct?

Monetary policy in Japan during the 1990s was:

All of the following would represent the transmission of monetary policy, except:

The high rates of inflation that were experienced in the 1970s could partly be blamed on all of the following except:

Asset-backed securities include:

During the 2007-2009 financial crisis, what prevented policy easing from being transmitted as usual to the real economy?

It has been argued that monetary policy reached its limits in Japan during the late 1990s and early 2000s.What fact created this belief?

The movement away from bank lending towards asset-backed securities has:

An open market purchase of securities by the central bank from banks will:

Monetary policymakers could keep equity and property price bubbles from developing by:

If the target federal funds rate reaches zero the FOMC:

Why is it more correct to say that there may be correlation between high interest rates and the growth rate of output but there is no clear causation?

Inflation can reduce the true cost of debt, and policymakers lower interest rates to encourage borrowing.Is it a good idea then to always take advantage of lower interest rates to borrow and rely on inflation to reduce the cost of debt and to increase your ability to repay the loan?

Comparing the banking systems of Japan and the U.S.during the 1990s and early 2000s, one would be likely to say that:

Given a firm's liabilities, an increase in interest rates reduces the firm's net worth because:

Over the past twenty-five years, bank loans as a percentage of total credit:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: the Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

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