Question 1

The demand curve for reserves shifts to the left and the federal funds rate falls when the Fed

Accepted Answer

A)  decreases reserve requirements or does an open market purchase.
B)  lowers the discount rate.
C)  lowers the discount rate or does an open market purchase.
D)  decreases reserves requirements.
E)  does an open market sale.

Question 2

The Fed's monetary policy strategy can be described as follows:

Accepted Answer

A)  The Fed uses its policy tools to adjust intermediate targets that directly impact its operating targets in a way that allows the Fed to achieve its goals.
B)  The Fed uses its policy tools to adjust operating targets that directly impact its intermediate targets in a way that allows the Fed to achieve its goals.
C)  The Fed uses its operating targets to adjust its intermediate targets that directly impact its policy tools in a way that allows the Fed to achieve its goals.
D)  None of the above.

Question 3

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

The answer of Describe the goals of the Federal Reserve....

Question 4

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

Accepted Answer

A)  measurability
B)  controllability
C)  flexibility
D)  predictability

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Explain how the Fed's use of its three tools of monetary policy affect supply and demand in the market for reserves and the equilibrium federal funds interest rate.

Accepted Answer

The answer of Explain how the Fed's use of its...

Question 7

Describe an asset-price bubble.

Accepted Answer

An asset-price bubble occurs when the pr...

Question 8

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.

Question 9

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

Question 10

Describe and discuss Chairman Bernanke's views on inflation targeting and transparency in central banking.

Accepted Answer

The answer of Describe and discuss Chairman Bernanke's views on...

Question 11

An important lesson from the 2007-2009 financial crisis is that central banks and other regulators should have a laissez-faire attitude and let credit-driven bubbles proceed without any reaction. Intervention is always a mistake.

Accepted Answer

A) True 
 B)False

Question 12

If the desired intermediate target is an interest rate, then the preferred operating target will be a(n) ________ variable like the ________.

Accepted Answer

A)  interest rate; three-month Treasury bill rate
B)  interest rate; federal funds rate
C)  reserve aggregate; monetary base
D)  reserve aggregate; nonborrowed base

Question 13

The discount rate is

Accepted Answer

A)  the interest rate on loans from the Fed to a bank.
B)  the price the Fed pays for government securities.
C)  the interest rate on loans of reserves from one bank to another.
D)  the price banks pay the Fed for government securities.
E)  the interest rate on loans from a bank to the federal government.

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.

Question 15

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.

Question 16

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.

Question 17

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.

Question 18

Explain why the use of an interest rate targeting strategy may result in procyclical monetary growth.

Accepted Answer

The answer of Explain why the use of an interest...

Question 19

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.

Question 20

Discount loans to banks experiencing severe liquidity problems are called

Accepted Answer

A)  primary credit.
B)  secondary credit.
C)  seasonal credit.
D)  lender-of-last-resort credit.

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

The demand curve for reserves shifts to the left and the federal funds rate falls when the Fed

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain why the use of an interest rate targeting strategy may result in procyclical monetary growth.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Describe an asset-price bubble.

Correct AnswerAnswered by ExamLex AIAn asset-price bubble occurs when the pr...View AnswerShow Answer

If the desired intermediate target is an interest rate, then the preferred operating target will be a(n) ________ variable like the ________.

Correct AnswerverifiedShow Answer

Discount loans to banks experiencing severe liquidity problems are called

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

An open market sale of securities by the Fed will

Correct AnswerverifiedShow Answer

The Fed's monetary policy strategy can be described as follows:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An important lesson from the 2007-2009 financial crisis is that central banks and other regulators should have a laissez-faire attitude and let credit-driven bubbles proceed without any reaction. Intervention is always a mistake.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

Describe and discuss Chairman Bernanke's views on inflation targeting and transparency in central banking.

Correct AnswerverifiedShow Answer

Explain how the Fed's use of its three tools of monetary policy affect supply and demand in the market for reserves and the equilibrium federal funds interest rate.

Correct AnswerverifiedShow Answer

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Answered by ExamLex AI
An asset-price bubble occurs when the pr...
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If the desired intermediate target is an interest rate, then the preferred operating target will be a(n) variable like the .

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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.

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