ECON 4111 Practice Exam

The pace of technological change would slow.

All but which one of the following is a reason that policymakers are concerned about the strength of the rebound from the 2007-2009 financial crisis?

the euro appreciates.

Assume that the Fed performs an unsterilized foreign exchange intervention in which it buys German government bonds in a world in which reserves are scarce. One result of this will be that

country A's monetary policy must be conducted so the inflation rate in country A matches the inflation rate in country B.

Assuming the free flow of capital across borders, if country A wants to fix its exchange rate with country B, then

be held by the Fed as part of its foreign exchange reserves.

Bonds issued by a foreign government in its own currency would

be held by the Fed as part of its securities.

Bonds issued by the U.S. Treasury would

higher interest rates can increase the cost of durable goods like automobiles.

Consumption can be sensitive to changes in the real interest rate because

all banks, member or not.

Currently the requirement of holding a non-interest-bearing reserve account at the Fed must be met by:

no examples of countries with high rates of money growth and low inflation rates.

Economic researchers have found

the nominal and real federal funds rates are highly positively correlated.

Empirical evidence suggests that over the last several decades,

deflation aggravates information problems in ways dissimilar to inflation.

Firms have a harder time getting loans during periods of deflation because

statements today about policy targets in the future.

Forward guidance is:

cost of external financing is lower.

Higher stock prices can lead to greater investment spending by firms because the

controls on capital outflows.

If domestic residents are restricted in their ability to purchase foreign assets, then their government is imposing

inflation rate in country A—the inflation rate in country B.

If inflation in country A exceeds inflation in country B, we can express the percentage change in the units of currency of country A per unit of currency of country B as the

money growth.

If inflation is very high, say 50 or 100 percent a year, monetary policymakers wishing to lower it will shift their focus to controlling

demand for dollars on the foreign exchange market would increase.

If reserves are scarce and interest rates in the United States increase relative to interest rates in Europe, then the

the same as it would be with an open market purchase.

If reserves are scarce, when the Fed enters the foreign exchange market and purchases euros in an unsterilized intervention, the impact on domestic banking reserves would be

the Federal Reserve itself.

If the Federal Reserve is to be independent, then the quantity of securities it purchases must be determined by

changes domestic interest rates.

In a world where reserves are scarce, a foreign exchange intervention by a central bank affects the value of a country's currency if it

an increase in the demand for dollars.

In a world where reserves are scarce, the impact on the foreign exchange market for dollars resulting from the Fed selling euros in an unsterilized intervention will be

providing deposit insurance.

In its role as the bankers' bank, a central bank performs each of the following, except:

unfavorably.

Most economists view capital controls

Discount rate

Of the following, which would not be considered an unconventional monetary policy approach?

there is a lower nominal-interest-rate bound of zero.

One of the limiting factors for using monetary policy is that

reducing real balances.

One of the ways inflation reduces aggregate demand is by

the money multiplier is unstable over time.

One thing the Fed has learned over the past 25 years is that

the size of the Fed's balance sheet through purchasing securities.

One way the Fed can inject reserves into the banking system is to increase

money growth rate.

Over the long run if central banks want to avoid high rates of inflation, they need to be concerned with the

short-term, usually overnight loans.

Primary credit extended by the Fed is:

sets the target federal funds rate range.

The FOMC

if banks stop making loans and businesses can't borrow to finance investment projects, economic growth could slow.

The Federal Reserve conducts an opinion survey on bank-lending practices because

President of the United States.

The Governors of the Federal Reserve System are appointed by the:

increase a borrower's assets and reduce the cost of their liabilities.

The balance-sheet channel of monetary policy works because it can

the 30-year U.S. Treasury bond rate.

The components of the formula for the Taylor rule includes each of the following, except:

difficult to forecast.

The impact of monetary policy on the exchange rate and net exports is best described as

monetary policies that cannot be reversed by anyone outside of the central bank.

The operational components required for truly independent central banks include:

interest rates

The primary monetary policy tool most used by central banks today is

interest rates.

The primary monetary policy tool most used by central banks today is

is inverse.

The relationship between the long-run real interest rate and potential output

money demand is not stable.

To say that the relationship between the velocity of money and the opportunity cost of holding money is not stable is the same as saying

expected returns on the bonds will be identical.

When arbitrage occurs across countries with a flexible exchange rate and when the bonds in each country are identical and there are no barriers to capital flows, then the

taking bold steps to stabilize the economy.

When central bankers are acting preemptively, they are

the collateral that is backing many of the loans banks have made is now worth less.

When equity and property prices collapse (bust), bank balance sheets are impaired because

has the same effect on inflation as an increase in money growth.

When the currency loses value, causing people to spend it more quickly, this

The ECB's marginal lending facility was the model for the Fed's redesign of its procedures for lending to banks.

Which of the following statements is true?