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.

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.

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

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.

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.

19) Members of the Board of Governors are

C) appointed by the president of the United States and confirmed by the Senate as members resign

A) chosen by the Federal Reserve Bank presidents

B) appointed by the newly elected president of the United States, as are cabinet positions.

D) never allowed to serve more than 7-year terms

20) Each governor on the Board of Governors can serve

B) one full nonrenewable fourteen-year term plus part of another term

A) only one nonrenewable fourteen-year term

C) only one nonrenewable eight-year term

D) one full nonrenewable eight-year term plus part of another term

23) Which of the following are duties of the Board of Governors of the Federal Reserve System?

A) Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash.

B) Setting the maximum interest rates payable on certain types of time deposits under Regulation Q.

C) Regulating credit with the approval of the president under the Credit Control Act of 1969.

D) All governors advise the president of the United States on economics policy

chapter 13

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University

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Hà Danh

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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

95 questions

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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