Question 1

If the Fed wants to temporarily drain reserves from the banking system,it will engage in

Accepted Answer

A)  a repurchase agreement. 
B)  a matched sale-purchase transaction. 
C)  a "pump" agreement. 
D)  none of the above. 
A)  a repurchase agreement. 
B)  a matched sale-purchase transaction. 
C)  a "pump" agreement. 
D)  none of the above.

Question 2

Can the Fed control the money supply? Has it done so? What evidence can you provide to support your answer to each question?

Accepted Answer

The Federal Reserve (the Fed) has the ab

Question 3

When workers voluntarily leave work while they look for better jobs,the resulting unemployment is called frictional unemployment.

Accepted Answer

A) True 
 B)False

Question 4

In the long run,the price stability goal is inconsistent with other goals,such as economics growth,stability of financial markets,etc.

Accepted Answer

A) True 
 B)False

Question 5

When it comes to choosing an operating target,both the ________ rate and ________ aggregates are easily controllable using the Fed's policy tools.

Accepted Answer

A)  federal funds; monetary 
B)  federal funds; reserve 
C)  three-month Treasury bill; monetary 
D)  ten-year Treasury bond; reserve 
A)  federal funds; monetary 
B)  federal funds; reserve 
C)  three-month Treasury bill; monetary 
D)  ten-year Treasury bond; reserve

Question 6

Compare the advantages and disadvantages of monetary targeting and inflation targeting.

Accepted Answer

The advantages of inflation targeting ar

Question 7

Inflation targeting involves

Accepted Answer

A)  a public announcement of medium-term numerical targets for inflation. 
B)  increased accountability of the central bank for attaining its inflation objectives. 
C)  an information-inclusive approach in which many variables are used in making decisions about monetary policy. 
D)  all of the above. 
A)  a public announcement of medium-term numerical targets for inflation. 
B)  increased accountability of the central bank for attaining its inflation objectives. 
C)  an information-inclusive approach in which many variables are used in making decisions about monetary policy. 
D)  all of the above.

Question 8

When workers voluntarily quit a job or decline a job offer so they can search for a better one,the resulting unemployment is called

Accepted Answer

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

Question 9

Although the goals of high employment and economic growth are closely related,policies can be specifically aimed at encouraging economic growth by

Accepted Answer

A)  encouraging firms to invest and people to save. 
B)  encouraging firms to limit their price increases. 
C)  encouraging people to consume. 
D)  all of the above. 
E)  only A and C of the above. 
A)  encouraging firms to invest and people to save. 
B)  encouraging firms to limit their price increases. 
C)  encouraging people to consume. 
D)  all of the above. 
E)  only A and C of the above.

Question 10

Discuss the differences between quantitative easing and credit easing.

Accepted Answer

Quantitative easing and credit easing ar

Question 11

Hierarchical mandates can cause a problem that Mervyn King,Governor of the Bank of England,refers to as an "inflation nutter," that can lead to large ________.

Accepted Answer

A)  inflation spikes 
B)  output fluctuations 
C)  unemployment rates 
D)  economic growth 
A)  inflation spikes 
B)  output fluctuations 
C)  unemployment rates 
D)  economic growth

Question 12

During QE1,the Fed purchased ________.

Accepted Answer

A)  $1.25 trillion in mortgage-backed securities 
B)  $600 billion in long-term Treasury securities 
C)  $40 billion in mortgage-backed securities and $45 billion in long-term Treasuries (to start) 
D)  $500 billion in U.S. corporate debt 
A)  $1.25 trillion in mortgage-backed securities 
B)  $600 billion in long-term Treasury securities 
C)  $40 billion in mortgage-backed securities and $45 billion in long-term Treasuries (to start) 
D)  $500 billion in U.S. corporate debt

Question 13

Disadvantages of using reserve requirements to control the money supply include

Accepted Answer

A)  their overly-powerful impact on the money supply. 
B)  creating potential liquidity problems for banks with high levels of excess reserves. 
C)  their overly-powerful impact on the monetary base. 
D)  all of the above. 
A)  their overly-powerful impact on the money supply. 
B)  creating potential liquidity problems for banks with high levels of excess reserves. 
C)  their overly-powerful impact on the monetary base. 
D)  all of the above.

Question 14

If the Federal Reserve wants to expand reserves in the banking system,it will

Accepted Answer

A)  purchase government securities. 
B)  raise the discount rate. 
C)  sell government securities. 
D)  raise reserve requirements. 
A)  purchase government securities. 
B)  raise the discount rate. 
C)  sell government securities. 
D)  raise reserve requirements.

Question 15

Describe the goals of the Federal Reserve.What happens when these goals come into conflict? How would one decide if lower inflation is more important than lower unemployment? Explain.

Accepted Answer

Federal Reserve- It is an independent in

Question 16

Which of the following statements is true regarding the Fed's procedures for operating the discount window?

Accepted Answer

A)  The Fed's operating procedures and paying interest on reserves contains the federal funds rate between the interest rate paid on reserves and the discount rate. 
B)  The Fed's operating procedures and paying interest on reserves creates more fluctuation in the federal funds rate than if they simply didn't pay interest on reserves. 
C)  The Fed's operating procedures and paying interest on reserves has no impact on the fluctuation of the federal funds rate. 
D)  None of the above is correct. 
A)  The Fed's operating procedures and paying interest on reserves contains the federal funds rate between the interest rate paid on reserves and the discount rate. 
B)  The Fed's operating procedures and paying interest on reserves creates more fluctuation in the federal funds rate than if they simply didn't pay interest on reserves. 
C)  The Fed's operating procedures and paying interest on reserves has no impact on the fluctuation of the federal funds rate. 
D)  None of the above is correct.

Question 17

Discuss the role of the Fed as a lender of last resort during the 2007-2009 financial crisis.

Accepted Answer

Crisis of 2007-2009 was due to failure o

Question 18

An open market transaction intended to change the level of bank reserves is a

Accepted Answer

A)  repurchase agreement. 
B)  reverse repo. 
C)  dynamic operation. 
D)  defensive operation. 
A)  repurchase agreement. 
B)  reverse repo. 
C)  dynamic operation. 
D)  defensive operation.

Question 19

"The interest rate targeting strategy employed by the Fed in the 1960s and 1970s led to procyclical money growth." True,false,or uncertain? Why?

Accepted Answer

A) True 
 B)False

Question 20

The type of open market operation intended to offset movements in other factors that affect reserves and the monetary base is

Accepted Answer

A)  the dynamic open market operations. 
B)  the defensive open market operations. 
C)  the reserve requirements. 
D)  market equilibrium. 
A)  the dynamic open market operations. 
B)  the defensive open market operations. 
C)  the reserve requirements. 
D)  market equilibrium.

Exam 10: Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

If the Fed wants to temporarily drain reserves from the banking system,it will engage in

Can the Fed control the money supply? Has it done so? What evidence can you provide to support your answer to each question?

When workers voluntarily leave work while they look for better jobs,the resulting unemployment is called frictional unemployment.

In the long run,the price stability goal is inconsistent with other goals,such as economics growth,stability of financial markets,etc.

When it comes to choosing an operating target,both the ________ rate and ________ aggregates are easily controllable using the Fed's policy tools.

Compare the advantages and disadvantages of monetary targeting and inflation targeting.

Inflation targeting involves

When workers voluntarily quit a job or decline a job offer so they can search for a better one,the resulting unemployment is called

Although the goals of high employment and economic growth are closely related,policies can be specifically aimed at encouraging economic growth by

Discuss the differences between quantitative easing and credit easing.

Hierarchical mandates can cause a problem that Mervyn King,Governor of the Bank of England,refers to as an "inflation nutter," that can lead to large ________.

During QE1,the Fed purchased ________.

Disadvantages of using reserve requirements to control the money supply include

If the Federal Reserve wants to expand reserves in the banking system,it will

Describe the goals of the Federal Reserve.What happens when these goals come into conflict? How would one decide if lower inflation is more important than lower unemployment? Explain.

Which of the following statements is true regarding the Fed's procedures for operating the discount window?

Discuss the role of the Fed as a lender of last resort during the 2007-2009 financial crisis.

An open market transaction intended to change the level of bank reserves is a

"The interest rate targeting strategy employed by the Fed in the 1960s and 1970s led to procyclical money growth." True,false,or uncertain? Why?

The type of open market operation intended to offset movements in other factors that affect reserves and the monetary base is

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

When it comes to choosing an operating target,both the rate and aggregates are easily controllable using the Fed's policy tools.