Question 1

Which of the following is not a requirement in selecting an intermediate target?

Accepted Answer

A)  Measurability 
B)  Controllability 
C)  Flexibility 
D)  Predictability 
A)  Measurability 
B)  Controllability 
C)  Flexibility 
D)  Predictability

Question 2

Assets on the Fed's balance sheet include

Accepted Answer

A)  government securities and currency in circulation. 
B)  discount loans and reserves. 
C)  government securities and discount loans. 
D)  currency in circulation and reserves. 
A)  government securities and currency in circulation. 
B)  discount loans and reserves. 
C)  government securities and discount loans. 
D)  currency in circulation and reserves.

Question 3

Open market purchases by the Fed increase the supply of nonborrowed reserves.

Accepted Answer

A) True 
 B)False

Question 4

In response to an asset-price bubble,macroprudential regulation appears to be the right tool.What is macroprudential regulation?

Accepted Answer

A)  Increasing the federal funds rate across the macroeconomy 
B)  The use of tax incentives to capture some of the gains from bubbles 
C)  Regulatory policy to affect what is happening in credit markets in the aggregate 
D)  None of the above is correct. 
A)  Increasing the federal funds rate across the macroeconomy 
B)  The use of tax incentives to capture some of the gains from bubbles 
C)  Regulatory policy to affect what is happening in credit markets in the aggregate 
D)  None of the above is correct.

Question 5

Which of the following statements is correct,concerning price stability as a monetary goal?

Accepted Answer

A)  In the long run, inconsistencies exists between the price stability goal and the other goals, such as high unemployment. 
B)  In the short run price stability does not conflict with the goals of high employment and interest-rate stability. 
C)  Neither A nor B is true. 
D)  Both A and B are correct. 
A)  In the long run, inconsistencies exists between the price stability goal and the other goals, such as high unemployment. 
B)  In the short run price stability does not conflict with the goals of high employment and interest-rate stability. 
C)  Neither A nor B is true. 
D)  Both A and B are correct.

Question 6

Holding everything else constant,if the federal funds rate rises,then the demand for

Accepted Answer

A)  excess reserves rises because they have a higher return. 
B)  excess reserves falls because they have a higher cost. 
C)  required reserves falls because the cost of borrowing from the Fed is relatively higher. 
D)  required reserves rises because the cost of borrowing from the Fed is relatively lower. 
E)  reserves will not change because the Fed sets the level of required reserves. 
A)  excess reserves rises because they have a higher return. 
B)  excess reserves falls because they have a higher cost. 
C)  required reserves falls because the cost of borrowing from the Fed is relatively higher. 
D)  required reserves rises because the cost of borrowing from the Fed is relatively lower. 
E)  reserves will not change because the Fed sets the level of required reserves.

Question 7

When there is a mismatch between job requirements and the skills of available workers,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 8

If the Federal Reserve wants to lower the monetary base and the money supply,it will

Accepted Answer

A)  increase bank reserves. 
B)  lower the discount rate. 
C)  sell government securities. 
D)  lower reserve requirements. 
A)  increase bank reserves. 
B)  lower the discount rate. 
C)  sell government securities. 
D)  lower reserve requirements.

Question 9

When the Federal Reserve was created,its most important role was intended to be

Accepted Answer

A)  a storage facility for the nation's gold. 
B)  a lender of last resort. 
C)  a regulator of bank holding companies. 
D)  none of the above. 
A)  a storage facility for the nation's gold. 
B)  a lender of last resort. 
C)  a regulator of bank holding companies. 
D)  none of the above.

Question 10

Price stability is desirable because

Accepted Answer

A)  inflation creates uncertainty, making it difficult to plan for the future. 
B)  everyone is better off when prices are stable. 
C)  price stability increases the profitability of the Fed. 
D)  it guarantees full employment. 
A)  inflation creates uncertainty, making it difficult to plan for the future. 
B)  everyone is better off when prices are stable. 
C)  price stability increases the profitability of the Fed. 
D)  it guarantees full employment.

Question 11

Which of the following is a potential operating target for the Fed?

Accepted Answer

A)  Nonborrowed reserves 
B)  The federal funds rate 
C)  The monetary base 
D)  All of the above 
A)  Nonborrowed reserves 
B)  The federal funds rate 
C)  The monetary base 
D)  All of the above

Question 12

If the Fed wants to "prick" an asset-pricing bubble driven by a credit boom,what is the primary tool for accomplishing this?

Accepted Answer

A)  Raising interest rates 
B)  Lowering interest rates 
C)  Increasing reserve requirements 
D)  Taking a short position in the overpriced asset 
A)  Raising interest rates 
B)  Lowering interest rates 
C)  Increasing reserve requirements 
D)  Taking a short position in the overpriced asset

Question 13

The Federal Open Market Committee makes the Fed's decisions on the purchase or sale of government securities,but these purchases or sales are executed by the Federal Reserve Bank of

Accepted Answer

A)  Chicago. 
B)  Boston. 
C)  New York. 
D)  San Francisco. 
A)  Chicago. 
B)  Boston. 
C)  New York. 
D)  San Francisco.

Question 14

An open market sale of securities by the Fed will

Accepted Answer

A)  decrease liabilities of the Fed and not affect assets of the banking system. 
B)  decrease assets of the nonbank public and decrease assets of the Fed. 
C)  increase liabilities of the banking system and increase assets of the Fed. 
D)  have no effect on assets of the nonbank public but increase liabilities of the Fed. 
E)  decrease assets of the banking system and increase assets of the Fed. 
A)  decrease liabilities of the Fed and not affect assets of the banking system. 
B)  decrease assets of the nonbank public and decrease assets of the Fed. 
C)  increase liabilities of the banking system and increase assets of the Fed. 
D)  have no effect on assets of the nonbank public but increase liabilities of the Fed. 
E)  decrease assets of the banking system and increase assets of the Fed.

Question 15

If the Federal Reserve wants to drain reserves from the banking system,it will

Accepted Answer

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

Question 16

If the Fed uses nonborrowed reserves,a reserve aggregate,as a target,an increase in the demand for reserves will result in a(n)________ in ________.

Accepted Answer

A)  increase; nonborrowed reserves 
B)  decrease; nonborrowed reserves 
C)  increase; the federal funds interest rate 
D)  decrease; the federal funds interest rate 
A)  increase; nonborrowed reserves 
B)  decrease; nonborrowed reserves 
C)  increase; the federal funds interest rate 
D)  decrease; the federal funds interest rate

Question 17

During 2007 as the global financial crisis started,the Fed implemented several new lending programs to increase liquidity,including ________.

Accepted Answer

A)  expansion of the discount window 
B)  setting up the Term Auction Facility, making loans through competitive auctions 
C)  lending to investment banks 
D)  only A and B above. 
E)  A, B, and C, are all correct. 
A)  expansion of the discount window 
B)  setting up the Term Auction Facility, making loans through competitive auctions 
C)  lending to investment banks 
D)  only A and B above. 
E)  A, B, and C, are all correct.

Question 18

Which of the following statements is correct,concerning price stability as a monetary goal?

Accepted Answer

A)  In the long run, no inconsistency exists between the price stability goal and the other goals, such as high unemployment. 
B)  In the short run price stability often conflicts with the goals of high employment and interest-rate stability. 
C)  Neither A nor B is true. 
D)  Both A and B are correct. 
A)  In the long run, no inconsistency exists between the price stability goal and the other goals, such as high unemployment. 
B)  In the short run price stability often conflicts with the goals of high employment and interest-rate stability. 
C)  Neither A nor B is true. 
D)  Both A and B are correct.

Question 19

Why does the Fed use open market operations to a greater extent than reserve requirements in its conduct of monetary policy?

Accepted Answer

Open market Operations refer to the buyi

Question 20

Which of the following statements is true?

Accepted Answer

A)  Credit-driven asset bubbles are particularly dangerous. When asset prices fall, the deleveraging of credit markets reduces economic activity. 
B)  Bubbles driven soley by irrational exuberance lead to a failure of financial institutions. 
C)  Both A and B are correct. 
D)  Neither A nor B is correct. 
A)  Credit-driven asset bubbles are particularly dangerous. When asset prices fall, the deleveraging of credit markets reduces economic activity. 
B)  Bubbles driven soley by irrational exuberance lead to a failure of financial institutions. 
C)  Both A and B are correct. 
D)  Neither A nor B is correct.

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

Which of the following is not a requirement in selecting an intermediate target?

Assets on the Fed's balance sheet include

Open market purchases by the Fed increase the supply of nonborrowed reserves.

In response to an asset-price bubble,macroprudential regulation appears to be the right tool.What is macroprudential regulation?

Which of the following statements is correct,concerning price stability as a monetary goal?

Holding everything else constant,if the federal funds rate rises,then the demand for

When there is a mismatch between job requirements and the skills of available workers,the resulting unemployment is called

If the Federal Reserve wants to lower the monetary base and the money supply,it will

When the Federal Reserve was created,its most important role was intended to be

Price stability is desirable because

Which of the following is a potential operating target for the Fed?

If the Fed wants to "prick" an asset-pricing bubble driven by a credit boom,what is the primary tool for accomplishing this?

The Federal Open Market Committee makes the Fed's decisions on the purchase or sale of government securities,but these purchases or sales are executed by the Federal Reserve Bank of

An open market sale of securities by the Fed will

If the Federal Reserve wants to drain reserves from the banking system,it will

If the Fed uses nonborrowed reserves,a reserve aggregate,as a target,an increase in the demand for reserves will result in a(n)________ in ________.

During 2007 as the global financial crisis started,the Fed implemented several new lending programs to increase liquidity,including ________.

Which of the following statements is correct,concerning price stability as a monetary goal?

Why does the Fed use open market operations to a greater extent than reserve requirements in its conduct of monetary policy?

Which of the following statements is true?

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

If the Fed uses nonborrowed reserves,a reserve aggregate,as a target,an increase in the demand for reserves will result in a(n) in .