Question 1

An important problem facing the Fed is that

Accepted Answer

A)  the goals for economic growth and price stability may conflict in the short run. 
B)  it lost effective control over the monetary base. 
C)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with Congress. 
D)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with the President. 
A)  the goals for economic growth and price stability may conflict in the short run. 
B)  it lost effective control over the monetary base. 
C)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with Congress. 
D)  it has been given responsibility for meeting policy goals, but true control over monetary policy remains with the President.

Question 2

Which of the following is NOT considered to be a goal of monetary policy?

Accepted Answer

A)  fair wages 
B)  high employment 
C)  economic growth 
D)  price stability 
A)  fair wages 
B)  high employment 
C)  economic growth 
D)  price stability

Question 3

An open market purchase

Accepted Answer

A)  increases the monetary base. 
B)  decreases the monetary base. 
C)  increases the federal funds rate. 
D)  is another name for a discount loan. 
A)  increases the monetary base. 
B)  decreases the monetary base. 
C)  increases the federal funds rate. 
D)  is another name for a discount loan.

Question 4

When financial markets and institutions are not efficient in matching savers and borrowers,

Accepted Answer

A)  interest rates fall, which discourages saving even further. 
B)  interest rates fall, which discourages investment even further. 
C)  resources are lost. 
D)  investment rises. 
A)  interest rates fall, which discourages saving even further. 
B)  interest rates fall, which discourages investment even further. 
C)  resources are lost. 
D)  investment rises.

Question 5

How does the Open Market Trading Desk conduct its operations?

Accepted Answer

A)  directly with private securities dealers on the floor of the New York Stock Exchange 
B)  directly with private securities dealers on the floor of the Federal Reserve Bank of New York 
C)  over-the-counter electronically with private securities dealers 
D)  by sending its buy and sell orders to the U.S. Treasury for execution 
A)  directly with private securities dealers on the floor of the New York Stock Exchange 
B)  directly with private securities dealers on the floor of the Federal Reserve Bank of New York 
C)  over-the-counter electronically with private securities dealers 
D)  by sending its buy and sell orders to the U.S. Treasury for execution

Question 6

When the staff of the account manager at the Fed's Open Market Trading Desk analyzes forecasts on Treasury deposits and information on the timing of future Treasury sales of securities,what agency does it interact with?

Accepted Answer

A)  The Securities and Exchange Commission 
B)  The Treasury's Office of Government Finance 
C)  The Treasury's Office of Federal Reserve Relations 
D)  The Federal Deposit Insurance Corporation 
A)  The Securities and Exchange Commission 
B)  The Treasury's Office of Government Finance 
C)  The Treasury's Office of Federal Reserve Relations 
D)  The Federal Deposit Insurance Corporation

Question 7

Expansionary monetary policy consists of all of the following EXCEPT

Accepted Answer

A)  open market sales. 
B)  lower interest rates. 
C)  increased monetary base. 
D)  increased money supply. 
A)  open market sales. 
B)  lower interest rates. 
C)  increased monetary base. 
D)  increased money supply.

Question 8

According to the Taylor rule,what should the federal funds rate target be if inflation is 5%,the target rate of inflation is 2%,the equilibrium real federal funds rate is 2%,full-employment real GDP is $9 trillion,and current real GDP is $8.55 trillion?

Accepted Answer

Fed funds rate targe

Question 9

How were open market operations conducted prior to 1935?

Accepted Answer

A)  They were carried out by the Federal Open Market Committee. 
B)  They were carried out under the direction of the Secretary of the Treasury. 
C)  They were carried out by the district Federal Reserve banks. 
D)  They were carried out by the Banking Committee of the House of Representatives. 
A)  They were carried out by the Federal Open Market Committee. 
B)  They were carried out under the direction of the Secretary of the Treasury. 
C)  They were carried out by the district Federal Reserve banks. 
D)  They were carried out by the Banking Committee of the House of Representatives.

Question 10

Intermediate targets are

Accepted Answer

A)  interim goals set on the way to fully achieving policy goals. 
B)  targets for policy goals that are of secondary importance. 
C)  targets the Fed hopes to achieve by June of each year. 
D)  financial variables, such as interest rates or monetary aggregates, the Fed believes will help it to achieve policy goals. 
A)  interim goals set on the way to fully achieving policy goals. 
B)  targets for policy goals that are of secondary importance. 
C)  targets the Fed hopes to achieve by June of each year. 
D)  financial variables, such as interest rates or monetary aggregates, the Fed believes will help it to achieve policy goals.

Question 11

Interest rate fluctuations

Accepted Answer

A)  are usually not considered to be of much importance and are largely ignored by the Fed. 
B)  have the paradoxical effect of increasing the rate of economic growth. 
C)  make it difficult for households and firms to plan for the future. 
D)  have largely been eliminated by the Fed during the past two decades. 
A)  are usually not considered to be of much importance and are largely ignored by the Fed. 
B)  have the paradoxical effect of increasing the rate of economic growth. 
C)  make it difficult for households and firms to plan for the future. 
D)  have largely been eliminated by the Fed during the past two decades.

Question 12

High employment spurs economic growth because high employment

Accepted Answer

A)  usually reduces inflation. 
B)  discourages foreign imports. 
C)  often leads to a high birth rate. 
D)  often leads to high rates of investment. 
A)  usually reduces inflation. 
B)  discourages foreign imports. 
C)  often leads to a high birth rate. 
D)  often leads to high rates of investment.

Question 13

Congress established the FOMC because

Accepted Answer

A)  a group was needed to set reserve requirements for member banks. 
B)  of a lack of coordination among district banks in carrying out open market operations. 
C)  Congress was attempting to expand its influence within the Federal Reserve System. 
D)  a group was needed to coordinate the setting of discount rates by the district banks. 
A)  a group was needed to set reserve requirements for member banks. 
B)  of a lack of coordination among district banks in carrying out open market operations. 
C)  Congress was attempting to expand its influence within the Federal Reserve System. 
D)  a group was needed to coordinate the setting of discount rates by the district banks.

Question 14

Open market operations

Accepted Answer

A)  lack flexibility because only very small purchases or sales may be carried out in any given month. 
B)  lack flexibility because open market purchases cannot easily be offset by subsequent open market sales. 
C)  are more flexible than other policy tools. 
D)  may be carried out only on the third Friday of each month. 
A)  lack flexibility because only very small purchases or sales may be carried out in any given month. 
B)  lack flexibility because open market purchases cannot easily be offset by subsequent open market sales. 
C)  are more flexible than other policy tools. 
D)  may be carried out only on the third Friday of each month.

Question 15

Dynamic open market operations

Accepted Answer

A)  are aimed at achieving changes in monetary policy. 
B)  are used much more frequently than defensive open market transactions. 
C)  are used to offset disturbances to the monetary base. 
D)  make it easy to deduce the Fed's intentions for monetary policy. 
A)  are aimed at achieving changes in monetary policy. 
B)  are used much more frequently than defensive open market transactions. 
C)  are used to offset disturbances to the monetary base. 
D)  make it easy to deduce the Fed's intentions for monetary policy.

Question 16

According to Taylor's rule,all of the following variables help explain the behavior of the federal funds rate EXCEPT

Accepted Answer

A)  output gap. 
B)  current inflation. 
C)  inflation gap. 
D)  yield curve. 
A)  output gap. 
B)  current inflation. 
C)  inflation gap. 
D)  yield curve.

Question 17

Describe the temporary lending facilities that the Fed set up during the Financial Crisis of 2007-2009.

Accepted Answer

Under the primary dealer credit facility

Question 18

Increases in interest rates are often blamed on

Accepted Answer

A)  Congress. 
B)  the President. 
C)  the Fed. 
D)  the U.S. Treasury. 
A)  Congress. 
B)  the President. 
C)  the Fed. 
D)  the U.S. Treasury.

Question 19

The Fed monitors reserve requirements

Accepted Answer

A)  daily. 
B)  during two-week maintenance periods. 
C)  monthly. 
D)  annually. 
A)  daily. 
B)  during two-week maintenance periods. 
C)  monthly. 
D)  annually.

Question 20

What has been the approach of the European Central Bank to monetary targeting?

Accepted Answer

Although the European Central

An important problem facing the Fed is that

Which of the following is NOT considered to be a goal of monetary policy?

An open market purchase

When financial markets and institutions are not efficient in matching savers and borrowers,

How does the Open Market Trading Desk conduct its operations?

When the staff of the account manager at the Fed's Open Market Trading Desk analyzes forecasts on Treasury deposits and information on the timing of future Treasury sales of securities,what agency does it interact with?

Expansionary monetary policy consists of all of the following EXCEPT

According to the Taylor rule,what should the federal funds rate target be if inflation is 5%,the target rate of inflation is 2%,the equilibrium real federal funds rate is 2%,full-employment real GDP is $9 trillion,and current real GDP is $8.55 trillion?

How were open market operations conducted prior to 1935?

Intermediate targets are

Interest rate fluctuations

High employment spurs economic growth because high employment

Congress established the FOMC because

Open market operations

Dynamic open market operations

According to Taylor's rule,all of the following variables help explain the behavior of the federal funds rate EXCEPT

Describe the temporary lending facilities that the Fed set up during the Financial Crisis of 2007-2009.

Increases in interest rates are often blamed on

The Fed monitors reserve requirements

What has been the approach of the European Central Bank to monetary targeting?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 15: Monetary Policy

An important problem facing the Fed is that

Which of the following is NOT considered to be a goal of monetary policy?

An open market purchase

When financial markets and institutions are not efficient in matching savers and borrowers,

How does the Open Market Trading Desk conduct its operations?

When the staff of the account manager at the Fed's Open Market Trading Desk analyzes forecasts on Treasury deposits and information on the timing of future Treasury sales of securities,what agency does it interact with?

Expansionary monetary policy consists of all of the following EXCEPT

According to the Taylor rule,what should the federal funds rate target be if inflation is 5%,the target rate of inflation is 2%,the equilibrium real federal funds rate is 2%,full-employment real GDP is $9 trillion,and current real GDP is $8.55 trillion?

How were open market operations conducted prior to 1935?

Intermediate targets are

Interest rate fluctuations

High employment spurs economic growth because high employment

Congress established the FOMC because

Open market operations

Dynamic open market operations

According to Taylor's rule,all of the following variables help explain the behavior of the federal funds rate EXCEPT

Describe the temporary lending facilities that the Fed set up during the Financial Crisis of 2007-2009.

Increases in interest rates are often blamed on

The Fed monitors reserve requirements

What has been the approach of the European Central Bank to monetary targeting?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters