Question 1

The number of central banks that exist in the world today is:

Accepted Answer

A) Less than 10 
B) About 250 
C) Over 170 
D) Over 50 but less than 100 
A) Less than 10 
B) About 250 
C) Over 170 
D) Over 50 but less than 100

Question 2

To be independent, a central bank must have:

Accepted Answer

A) Its policies overturned only by the president 
B) Control of its own budget 
C) The board members appointed for very short terms 
D) The chairperson serve as a member of the President's cabinet 
A) Its policies overturned only by the president 
B) Control of its own budget 
C) The board members appointed for very short terms 
D) The chairperson serve as a member of the President's cabinet

Question 3

Imagine you own a retail mail order business.You produce your catalog, where items and prices are listed, in January and you use the same catalog all year.The central bank in your country increases the money supply by an amount to cause inflation to average one percent each month.Ignoring any seasonality in sales (like the holiday season), what should happen to your sales as the year progresses and why?

Accepted Answer

As the year progresses sales should incr

Question 4

In the United States, the Federal Reserve is asked to:

Accepted Answer

A) Deliver on a specific inflation target set by Congress 
B) Meet an explicit target for economic growth 
C) Meet a specific target for unemployment each year 
D) Deliver price stability as one of a number of objectives 
A) Deliver on a specific inflation target set by Congress 
B) Meet an explicit target for economic growth 
C) Meet a specific target for unemployment each year 
D) Deliver price stability as one of a number of objectives

Question 5

Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.

Accepted Answer

We can borrow one from the text.By mid-2

Question 6

General agreement among economists finds that they believe monetary policy is more effective when it is formed:

Accepted Answer

A) By an individual rather than a committee 
B) In secrecy without the reasoning behind it being revealed for many years 
C) To keep financial markets guessing 
D) Independently of political pressure 
A) By an individual rather than a committee 
B) In secrecy without the reasoning behind it being revealed for many years 
C) To keep financial markets guessing 
D) Independently of political pressure

Question 7

Many governments give their central bank control over issuing currency because:

Accepted Answer

A) Printing currency can be profitable for a government so government officials may have a strong incentive to print too much 
B) Having large amounts of currency can lead to lower rates of inflation 
C) Central banks use the profits from issuing currency to finance their operations 
D) The only way to distribute currency to banks is through the central bank 
A) Printing currency can be profitable for a government so government officials may have a strong incentive to print too much 
B) Having large amounts of currency can lead to lower rates of inflation 
C) Central banks use the profits from issuing currency to finance their operations 
D) The only way to distribute currency to banks is through the central bank

Question 8

To say monetary policy is transparent implies:

Accepted Answer

A) That anyone could figure out what the correct policy should be 
B) Monetary policy should not be so difficult that most people couldn't understand it 
C) Policymakers offer plausible explanations for their decisions along with supporting data 
D) That when faced with the same problem, policymakers will always react the same way 
A) That anyone could figure out what the correct policy should be 
B) Monetary policy should not be so difficult that most people couldn't understand it 
C) Policymakers offer plausible explanations for their decisions along with supporting data 
D) That when faced with the same problem, policymakers will always react the same way

Question 9

The Federal Reserve's Fedwire system is used mainly to provide:

Accepted Answer

A) A means for foreign banks to transfer funds to U.S.banks 
B) An inexpensive and reliable way for financial institutions to transfer funds to one another 
C) An inexpensive way for individuals to pay their bills on-line 
D) A means for the Treasury to collect tax payments 
A) A means for foreign banks to transfer funds to U.S.banks 
B) An inexpensive and reliable way for financial institutions to transfer funds to one another 
C) An inexpensive way for individuals to pay their bills on-line 
D) A means for the Treasury to collect tax payments

Question 10

In the U.S.the right to issue currency is held by:

Accepted Answer

A) The Federal Reserve 
B) The U.S.Treasury 
C) The Office of the Comptroller of the Currency 
D) The U.S.Mint 
A) The Federal Reserve 
B) The U.S.Treasury 
C) The Office of the Comptroller of the Currency 
D) The U.S.Mint

Question 11

Which of the following would give the most importance to the goal of exchange rate stability?

Accepted Answer

A) Small, less developed, trade-oriented countries 
B) The U.S.and Japan and other developed countries 
C) Emerging market countries where exports and imports are central to the structure of the economy 
D) Europe 
A) Small, less developed, trade-oriented countries 
B) The U.S.and Japan and other developed countries 
C) Emerging market countries where exports and imports are central to the structure of the economy 
D) Europe

Question 12

Discuss how the goals of central bankers can be linked to risk and the ability or inability of individuals to eliminate this risk.

Accepted Answer

We learned in a previous chapter that in

Question 13

In the United States, monetary policy is formed by:

Accepted Answer

A) An individual advised by a close group of people 
B) Committee 
C) The President and approved by Congress 
D) The Chairman of the Federal Reserve and can only be overturned by the presidents of the Regional Federal Reserve Banks 
A) An individual advised by a close group of people 
B) Committee 
C) The President and approved by Congress 
D) The Chairman of the Federal Reserve and can only be overturned by the presidents of the Regional Federal Reserve Banks

Question 14

Keeping interest rates stable is:

Accepted Answer

A) The most important goal for a central bank 
B) The focus of the central bank, stable interest rates will result in all other goals being achieved 
C) A secondary goal for central banks 
D) Not a goal of the central bank 
A) The most important goal for a central bank 
B) The focus of the central bank, stable interest rates will result in all other goals being achieved 
C) A secondary goal for central banks 
D) Not a goal of the central bank

Question 15

Successful monetary policy relies most on:

Accepted Answer

A) Having an ample supply of highly qualified people 
B) Luck 
C) The institutional environment 
D) Knowledgeable citizens who know how to react to the policy 
A) Having an ample supply of highly qualified people 
B) Luck 
C) The institutional environment 
D) Knowledgeable citizens who know how to react to the policy

Question 16

One reason given for more central bankers releasing its decisions publicly is:

Accepted Answer

A) For monetary policy to work, people must be taken by surprise 
B) Most people do not understand monetary policy so it really doesn't do any harm to release the decisions publicly 
C) So that central banks across the world can coordinate their policies 
D) If monetary policy is going to be stabilizing, speculation about central bankers decisions should be minimized 
A) For monetary policy to work, people must be taken by surprise 
B) Most people do not understand monetary policy so it really doesn't do any harm to release the decisions publicly 
C) So that central banks across the world can coordinate their policies 
D) If monetary policy is going to be stabilizing, speculation about central bankers decisions should be minimized

Question 17

Fiscal policymakers may actually welcome some inflation for all of the following reasons except:

Accepted Answer

A) It potentially raises tax revenues 
B) It reduces the real value of the national debt allowing governments to "default" on a portion of their debt 
C) Interest payments tend to be fixed so the real interest payments are reduced 
D) It weakens the independence of the central bank 
A) It potentially raises tax revenues 
B) It reduces the real value of the national debt allowing governments to "default" on a portion of their debt 
C) Interest payments tend to be fixed so the real interest payments are reduced 
D) It weakens the independence of the central bank

Question 18

Stable inflation implies:

Accepted Answer

A) That the rate of inflation averaged over many years is zero(0) 
B) That inflation is predictable 
C) That the rate of inflation year after year is low 
D) Low rates of unemployment 
A) That the rate of inflation averaged over many years is zero(0) 
B) That inflation is predictable 
C) That the rate of inflation year after year is low 
D) Low rates of unemployment

Question 19

If we look back in history, why has the role of creating money fallen to central banks?

Accepted Answer

Historically central bank money has been

Question 20

The operational components required for truly independent central banks include:

Accepted Answer

A) A budget controlled by Congress 
B) The ability to have policies reversed 
C) Monetary policies that cannot be reversed by anyone outside of the central bank 
D) The chairperson of the bank being answerable only to the President 
A) A budget controlled by Congress 
B) The ability to have policies reversed 
C) Monetary policies that cannot be reversed by anyone outside of the central bank 
D) The chairperson of the bank being answerable only to the President

Exam 15: Central Banks in the World Today

The number of central banks that exist in the world today is:

To be independent, a central bank must have:

In the United States, the Federal Reserve is asked to:

Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.

General agreement among economists finds that they believe monetary policy is more effective when it is formed:

Many governments give their central bank control over issuing currency because:

To say monetary policy is transparent implies:

The Federal Reserve's Fedwire system is used mainly to provide:

In the U.S.the right to issue currency is held by:

Which of the following would give the most importance to the goal of exchange rate stability?

Discuss how the goals of central bankers can be linked to risk and the ability or inability of individuals to eliminate this risk.

In the United States, monetary policy is formed by:

Keeping interest rates stable is:

Successful monetary policy relies most on:

One reason given for more central bankers releasing its decisions publicly is:

Fiscal policymakers may actually welcome some inflation for all of the following reasons except:

Stable inflation implies:

If we look back in history, why has the role of creating money fallen to central banks?

The operational components required for truly independent central banks include:

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

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

Modern Monetary Policy and the Challenges Facing Central Bankers

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