Question 1

Quantitative easing and credit easing are essentially the same thing.

Accepted Answer

A) True 
 B)False

Question 2

An advantage of an intermediate targeting strategy is that it provides the Fed with

Accepted Answer

A)  more timely information regarding the effect of monetary policy. 
B)  a slow adjustment process. 
C)  a target that is precisely correlated with economic activity. 
D)  all of the above. 
E)  only A and B of the above. 
A)  more timely information regarding the effect of monetary policy. 
B)  a slow adjustment process. 
C)  a target that is precisely correlated with economic activity. 
D)  all of the above. 
E)  only A and B of the above.

Question 3

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

Accepted Answer

A)  excess reserves falls because they have a lower return. 
B)  excess reserves rises because they have a lower cost. 
C)  required reserves rises 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 falls because they have a lower return. 
B)  excess reserves rises because they have a lower cost. 
C)  required reserves rises 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 4

The actual execution of open market operations is done at

Accepted Answer

A)  the Board of Governors in Washington, D.C. 
B)  the Federal Reserve Bank of New York. 
C)  the Federal Reserve Bank of Philadelphia. 
D)  the Federal Reserve Bank of Boston. 
A)  the Board of Governors in Washington, D.C. 
B)  the Federal Reserve Bank of New York. 
C)  the Federal Reserve Bank of Philadelphia. 
D)  the Federal Reserve Bank of Boston.

Question 5

Which of the following is not an operating target?

Accepted Answer

A)  Nonborrowed reserves 
B)  Monetary base 
C)  Federal funds interest rate 
D)  Discount rate 
E)  All are operating targets 
A)  Nonborrowed reserves 
B)  Monetary base 
C)  Federal funds interest rate 
D)  Discount rate 
E)  All are operating targets

Question 6

Under inflation targeting,a central bank must pursue policies that

Accepted Answer

A)  keep the inflation rate at a target value of zero. 
B)  keep the inflation rate at some specific target value. 
C)  keep the inflation rate within a specific target range. 
D)  lower the inflation rate, provided this can be done without raising the unemployment rate above a specified target value. 
A)  keep the inflation rate at a target value of zero. 
B)  keep the inflation rate at some specific target value. 
C)  keep the inflation rate within a specific target range. 
D)  lower the inflation rate, provided this can be done without raising the unemployment rate above a specified target value.

Question 7

An open market ________ leads to a(n)________ of reserves and deposits in the banking system and hence to a(n)________ of the monetary base and the money supply.

Accepted Answer

A)  sale; expansion; contraction 
B)  purchase; expansion; contraction 
C)  sale; expansion; expansion 
D)  purchase; expansion; expansion 
A)  sale; expansion; contraction 
B)  purchase; expansion; contraction 
C)  sale; expansion; expansion 
D)  purchase; expansion; expansion

Question 8

During QE3,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 9

If inflation and unemployment are of direct concern to Fed officials,why do they make such a big issue about money growth and interest rates? Why don't they just target the unemployment rate and the inflation rate directly? Explain.

Accepted Answer

Inflation and unemployment are related t

Question 10

What are the arguments for and against central bank intervention during asset-price bubbles?

Accepted Answer

1 : The intervention of central bank du

Question 11

Describe what criteria is applied when choosing a policy instrument.

Accepted Answer

When choosing a policy instrument, sever

Question 12

Bank reserves can be categorized as

Accepted Answer

A)  vault cash and deposits at the Fed. 
B)  required reserves and excess reserves. 
C)  borrowed reserves and nonborrowed reserves. 
D)  all of the above. 
A)  vault cash and deposits at the Fed. 
B)  required reserves and excess reserves. 
C)  borrowed reserves and nonborrowed reserves. 
D)  all of the above.

Question 13

The Federal Reserve desires interest rate stability because

Accepted Answer

A)  it allows for less uncertainty about future planning. 
B)  interest rate volatility often leads to demands to curtail the Fed's power. 
C)  it guarantees full employment. 
D)  both A and B of the above. 
A)  it allows for less uncertainty about future planning. 
B)  interest rate volatility often leads to demands to curtail the Fed's power. 
C)  it guarantees full employment. 
D)  both A and B of the above.

Question 14

The Fed is reluctant to use reserve requirements to control the money supply because

Accepted Answer

A)  of their overly-powerful impact on the money supply. 
B)  they have the potential to create liquidity problems for banks with low excess reserves. 
C)  frequent changes in reserve requirements complicate liquidity management for banks. 
D)  of all of the above. 
E)  of only A and B of the above. 
A)  of their overly-powerful impact on the money supply. 
B)  they have the potential to create liquidity problems for banks with low excess reserves. 
C)  frequent changes in reserve requirements complicate liquidity management for banks. 
D)  of all of the above. 
E)  of only A and B of the above.

Question 15

Discuss how altering the composition of the Fed's balance sheet can stimulate the economy.

Accepted Answer

The composition of the Federal Reserve's

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

Quantitative easing and credit easing are essentially the same thing.

An advantage of an intermediate targeting strategy is that it provides the Fed with

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

The actual execution of open market operations is done at

Which of the following is not an operating target?

Under inflation targeting,a central bank must pursue policies that

An open market ________ leads to a(n)________ of reserves and deposits in the banking system and hence to a(n)________ of the monetary base and the money supply.

During QE3,the Fed purchased ________.

If inflation and unemployment are of direct concern to Fed officials,why do they make such a big issue about money growth and interest rates? Why don't they just target the unemployment rate and the inflation rate directly? Explain.

What are the arguments for and against central bank intervention during asset-price bubbles?

Describe what criteria is applied when choosing a policy instrument.

Bank reserves can be categorized as

The Federal Reserve desires interest rate stability because

The Fed is reluctant to use reserve requirements to control the money supply because

Discuss how altering the composition of the Fed's balance sheet can stimulate the economy.

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

An open market leads to a(n) of reserves and deposits in the banking system and hence to a(n) of the monetary base and the money supply.