8) A nominal anchor promotes price stability by

C) keeping inflation expectations low.

D) keeping economic growth low.

9) Monetary policy is considered time-inconsistent because

C) policymakers are tempted to pursue discretionary policy that is more expansionary in the short run.

A) of the lag times associated with the implementation of monetary policy and its effect on the economy

B) policymakers are tempted to pursue discretionary policy that is more contractionary in the short run

D) of the lag times associated with the recognition of a potential economic problem and the implementation of monetary policy.

13) If the central bank pursues a monetary policy that is more expansionary than what firms and people expect, then the central bank must be trying to

A) boost output in the short run

B) constrain output in the short run.

D) boost prices in the short run

14) The time-inconsistency problem in monetary policy can occur when the central bank conducts policy

C) on a discretionary, day-by-day basis.

B) using a strict and inflexible rule

D) using a flexible, discretionary rule.

1) Even if the Fed could completely control the money supply, monetary policy would have critics because

A) the Fed is asked to achieve many goals, some of which are incompatible with others

B) the Fedʹs goals do not include high employment, making labor unions a critic of the Fed

C) the Fedʹs primary goal is exchange rate stability, causing it to ignore domestic economic conditions

D) it is required to keep Treasury security prices high

2) High unemployment is undesirable because it

A) results in a loss of output.

C) always increases interest rates.

5) The goal for high employment should be a level of unemployment at which the demand for labor equals the supply of labor. Economists call this level of unemployment the

C) natural rate level of unemployment

A) frictional level of unemployment.

B) structural level of unemployment.

D) Keynesian rate level of unemployment.

6) Supply-side economic policies seek to

D) increase saving and investment using tax incentives

A) raise interest rates through contractionary monetary policy

B) increase federal government expenditures

C) increase consumption expenditures by increasing taxes

7) The Federal Reserve System was created to

B) promote financial market stability.

A) make it easier to finance budget deficits.

C) lower the unemployment rate.

D) promote rapid economic growth.

8) Having interest rate stability

A) allows for less uncertainty about future planning

B) leads to demands to curtail the Fedʹs power.

D) leads to problems in financial markets

1) Which set of goals can, at times, conflict in the short run?

C) High employment and price level stability

A) High employment and economic growth.

B) Interest rate stability and financial market stability

D) Exchange rate stability and financial market stability.

5) Either a dual or hierarchial mandate is acceptable as long as ________ is the primary goal in the ________.

C) reducing business-cycle fluctuations; short run

D) reducing business-cycle fluctuations; long run

1) The First Bank of the United States

A) was disbanded in 1811 when its charter was not renewed

B) had its charter renewal vetoed in 1832.

C) was fundamental in helping the Federal Government finance the War of 1812

2) The Second Bank of the United States

B) had its charter renewal vetoed in 1832.

A) was disbanded in 1811 when its charter was not renewed.

C) is considered to be the primary cause of the bank panic of 1907

3) The publicʹs fear of centralized power and distrust of moneyed interests led to the demise of the first two experiments in central banking:

A) the First Bank of the United States and the Second Bank of the United States.

B) the First Bank of the United States and the Central Bank of the United States.

C) the First Central Bank of the United States and the Second Central Bank of the United States

D) the First Bank of North America and the Second Bank of North America.

4) The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

D) a central bank was needed to prevent future panics.

A) the First Bank of the United States had failed to serve as a lender of last resort

B) the Second Bank of the United States had failed to serve as a lender of last resort.

C) the Federal Reserve System had failed to serve as a lender of last resort.

1) Which of the following is NOT an entity of the Federal Reserve System?

B) The Comptroller of the Currency

D) The Federal Open Market Committee

2) Which of the following is an entity of the Federal Reserve System?

C) The Comptroller of the Currency

4) The Federal Reserve Banks are ________ institutions since they are owned by the ________.

A) quasi-public; private commercial banks in the district where the Reserve Bank is located

B) public; private commercial banks in the district where the Reserve Bank is located

C) quasi-public; Board of Governors

10) An important function of the regional Federal Reserve Banks is

A) setting reserve requirements.

C) determining monetary policy.

D) setting margin requirements.

11) Which of the following functions are not performed by any of the twelve regional Federal Reserve Banks?

C) Setting interest rates payable on time deposits

B) Conducting economic research

12) All ________ are required to be members of the Fed

C) banks with assets less than $100 million

D) banks with assets less than $500 million

14) Prior to 1980, member banks left the Federal Reserve System due to

B) the high cost of required reserves.

A) the high cost of discount loans.

C) a desire to avoid interest rate regulations.

D) a desire to avoid credit controls.

15) The Fedʹs support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

A) concern over declining Fed membership.

B) belief that all banking regulations should be eliminated.

C) belief that interest rate ceilings were too high.

D) belief that depositors had to become more knowledgeable of banking operations.

16) Banks subject to reserve requirements set by the Federal Reserve System include

D) all banks whether or not they are members of the Federal Reserve System.

A) only nationally chartered banks.

B) only banks with assets less than $100 million.

C) only banks with assets less than $500 million.

17) The Depository Institutions Deregulation and Monetary Control Act of 1980

D) established uniform reserve requirements for all banks.

A) established higher reserve requirements for nonmember than for member banks

B) established higher reserve requirements for member than for nonmember banks.

C) abolished reserve requirements.

chapter 13

Authored by Hà Danh

English

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

1) The most common definition that monetary policymakers use for price stability is

A) low and stable deflation

B) an inflation rate of zero percent.

C) high and stable inflation

D) low and stable inflation

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

2) Price stability is desirable because

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

3) Inflation results in

A) ease of planning for the future

B) ease of comparing prices over time.

C) lower nominal interest rates

D) difficulty interpreting relative price movements.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

4) Economists believe that countries recently suffering hyperinflation have experienced

A) reduced growth.

B) increased growth.

C) reduced prices.

D) lower interest rates.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

5) A nominal variable, such as the inflation rate or the money supply, which ties down the price level to achieve price stability is called ________ anchor.

A) a nomina

B) a real

C) an operating

D) an intermediate

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

6) A central feature of monetary policy strategies in all countries is the use of a nominal variable that monetary policymakers use as an intermediate target to achieve an ultimate goal such as price stability. Such a variable is called a nominal

A) anchor.

B) benchmark.

C) tether

D) guideline.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

7) A central feature of monetary policy strategies in all countries is the use of a nominal anchor, which is a nominal variable that monetary policymakers use as an

A) operating target, such as the federal funds interest rate

B) intermediate target, such as the federal funds interest rate.

C) intermediate target to achieve an ultimate goal such as price stability

D) operating target to achieve an ultimate goal such as exchange rate stability

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chapter 13

1) The most common definition that monetary policymakers use for price stability is

2) Price stability is desirable because

3) Inflation results in

4) Economists believe that countries recently suffering hyperinflation have experienced

5) A nominal variable, such as the inflation rate or the money supply, which ties down the price level to achieve price stability is called ________ anchor.

6) A central feature of monetary policy strategies in all countries is the use of a nominal variable that monetary policymakers use as an intermediate target to achieve an ultimate goal such as price stability. Such a variable is called a nominal

7) A central feature of monetary policy strategies in all countries is the use of a nominal anchor, which is a nominal variable that monetary policymakers use as an

8) A nominal anchor promotes price stability by

9) Monetary policy is considered time-inconsistent because

10) The time-inconsistency problem with monetary policy tells us that, if policymakers use discretionary policy, there is a higher probability that the ________ will be higher, compared to policy makers following a behavior rule

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