2035_fall05_exam3

2035_fall05_exam3 - (n 1 The core CPI increased by 0.2 in...

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Unformatted text preview: (\ (n- 1) The core CPI increased by 0.2% in October 2005. Which of the following accounted for the majority of this increase? A) An increase in housing and medical care prices. Li Mir L ,A " ‘ B) An increase in the price of transportation services. \ - ' f' " C) An increase in gasoline prices due to the increase in oil prices. » - D) The surge in crude oil prices. 2) An increase in the interest rate paid on checlcable deposits, everything else held constant, will cause fi' in the currency ratio and g in the money supply. A) an increase; a decrease A. LC {,0 J? (kirk. , ‘A u r L J? .4 «(ex/av it 3 B) a decrease; an increase C) an increase; an increase D) a decrease; a decrease 3) The monetary liabilities of the Federal Reserve include 1: c\ w . . . ’e V‘ /'I F , J A) government securities and discount loans. V MC 5, B) Currency in circulation and discount loans. 56- \ it C“ T, ‘W . . a?” l a 15.9 C) government securltles and reserves. \ l \ D) currency in circulation and reserves. \ \ 4) Decisions by depositors to decrease their holdings of "m, or of banks to hold will reSult in a greater expansion of deposits than the simple model predicts. A) currency; excess reserves 4 5- B) deposits; excess reserves C) currency; required reserves D) deposits; required reserves 5) During the end of the year holiday season, depositors typically withdraw more currency from their accounts. This implies that during the end of the year holiday seasori. A) the money multiplier is unaffected [\\ :5 /0~"‘R\t B) excess reserves fall C) the money multiplier falls 1“ D) the money multiplier rises E) discount borrowing falls 6) According to the establishment servey, the number of non-farm business jobs changed by in October 2005. A) -8,000 B) 8,000 C) 56,000 D) 150,000 E) 156,000 f he fluctuations in both money supply growth and the federal funds rate during 1979—1982 suggest that the Fed A) never intended to target monetary aggregates. B) had shifted to borrowed reserves as an operating target. C) had shifted to total reserves as an operating target. D) had shifted to the monetary base as an operating target. 8) According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation the Fed's inflation target or when real GDP the Fed's output target. A) rises abOVe; rises above 7 i - ’ a 3) drops below; rises above - C) drops below; drops below D) rises above; drops below 9) Disadvantages of using reserve requirements to control the money supply and interest rates include A) their overly-powerfiJl impact on reserves and the monetary base. B) creating potential lending problems for banks with high levels of eXCess reserves. C) their overly-powerful impact on the money supply. D) all ofthe above. 10) if a member of the non—bank public sells a government bond to the Federal Reserve currency, the monetary base will , but reserves will A) remain unchanged; fall _ , w _ Bhemain unchanged; rise i C) rise; remain unchanged D) fall, remain unchanged 11) An increase in leads to an equal and permanent __ in the monetary base. A) securities; increase ,t . , 7 7 (,3) float; decrease -. V I i I _ I W '- 9" i; C) float; increaSe A I" I I z‘ ' 1' " ‘ “’ “a ’i D)securities; decrease l ‘ 7 J' '1 ‘ F m i 12) The excess reserves ratio is in» related to expected deposit outflows, and is ;_ related to the market interest rate. A) positively; negatively B) positively; positively C) negatively; positively /\ 31-3} l (fig. D) negatively; negatively i»; 1;: ' rx \3 a . if? C- TY) 13) 1f Treasury deposits at the Fed are predicted to increase, the manager of the trading desk at the N York Fed bank will likely conduct open market operations to A) defensive; inject B) dynamic; drain C) dynamic; inject D) defensive; drain reserves. 14) If the required reserve ratio is equal to 10 percent, a single bank can increase its loans up to a maximum amount equal to A) its total reserves. B) 10 times its excess reserves. C) 10 percent of its excess reserves. D) its excess reserves. 15) The charter of the First Bank of the United States was A) not renewed because Congress failed to renew the charter by a single vote B) allOWed to expire because Congress and the President decided to take no action to renew the charter C) not renewed because Congress declined to renew the charter by a unanimous vote D) not renewed because Congress failed to over-ride a Presidential veto 16) The National Banking Act of 1863 created which of the following financial regulatory agencies? A) The Federal Deposit Insurance Corporation (FDIC). B) The Securities and Exchange Commission (SEC). C) The Federal Reserve System. D) The Office of the Comptroller of the Currency (OCC). 17) According to Regulation A, the first type of discount loan given to banks is called and the interest rate charged on this type oforedit is set at for the federal funds rate. ,M'pfimary; 150; above 3) secondary; 150; above ,0 secondary; 150; below D) primary;100; above E) primary; 100; below credit basis points the Fed's target 18) As of today, the Federal Reserve's target for the federal funds rate is percent; A) 3.00 B) 3.25 “"11. C) 3.50 D) 3.75 E) 4.00 x.) VT) \79 tThe Fed's mistakes of the early 19305 were compounded by its decision to A) lower the monetary base in 1936-1937. B) lower reserve requirements in 1936-1937. C) raise the discount rate in 1936-1937. D) raise reserve requirements in 193611937. E) raise the monetary base in 1936-1937. 20) Which of the following is not an entity of the Federal Reserve System? A) The Board of Governors B) The FDIC C) The Federal Advisory Council D) Federal Reserve Banks 21) The primary reason for the creation of the Federal Reserve System was the desire to A) create a means to finance World War I. B) eliminate state-chartered banks. C) increase the demand for government bonds. D) stabilize short-term interest rates. hi i E) have a lender of last resort. \. 22) When the Fed acts as a lender of last resort, the type of loan it extends is A) primary credit. B) secondary credit. C) installment credit. D) emergency credit. E) seasonal credit. 23) A financial panic was averted in October 1987 following "Black Monday" when the Fed announced that A) it was lowering the discount rate on extended credit. B) C) it stood ready to purchase common stocks to prevent a further slide in stook prices. D) all of the above. 24) F or a given level of the monetary base, an increase in the money market fund ratio will mean in the M2 money multiplier and in the M2 money supply. A) an increase; a decrease B) a decrease; an increase C) a decrease; a decrease D) an increase; an increase B-4 it would provide discount loans to any bank that would make loans to the security industry. T7 T. u [‘\ t// 25) The Fed accidentally discovered open market operations in the early A) 18905. B) 19105. ‘ C) 19005. t, I D) 19205. ' Vu“ “7r- 0 w" 'éi 19,1, 26) Although neither nor the 4"”are officially set by the Federai Open Market Committee, decisions concerning these policy tools are effectively made by the committee. A) reserve requirements; federal funds rate B) reserve requirements; discount rate C) margin requirements; federal funds rate D) margin requirements; discount rate 27) If the FOMC had a tightening bias in monetary policy, then which of the following FOMC Statement passages would be consistent with this bias? A) The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. B) Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future. C) The Committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. 28) For the past few weeks, the 4-week average of initial claims have A) remained at their post-hurricane highs, but there is some indication that they will be decreasing back to pro-hurricane levels B) remained at their post—hurricane highs with no indication of decreasing back to pre—hurricane levels C) come off their post-hurricane influenCed high but are not back to pre—hurricane levels yet D) continued to climb and have not reached any post-hurricane peak as of yet E) come off their post-hurricane influenced high and are at pre-hurricane levels 29) An increase in the monetary base that goes into 7 ' f not multiplied, while an increase that goes into is multiplied. A) deposits; currency B) excess reserves; currency C) deposits; excess reserves D) currency; deposits E) currency; excess reserves -) Which of the following is NOTa possible operating target? A) non-borrowed reserves B) Discount rate C) Federal funds interest rate D) Monetary base ...
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2035_fall05_exam3 - (n 1 The core CPI increased by 0.2 in...

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