18 - award'I I out of 10 points The targetfederal funds...

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Unformatted text preview: award: 'I I) out of ' 10 points The targetfederal funds rate is the: I“ interest rate the Fed charges banks for short-term loans. efi 9* the Fed's desired interest rate on overnight loans among banks. 1* the actual interest rate banks charge each otherfor overnight loans of excess reserves. r‘ the efiective or market interest rate resulting from Fed loans to financial intermediaries. Multiple Choice Section: The Federal Reserve's Conventional Policy Toolbox ""‘Fn'e ciiagraHiBEi536EH25653lHE'fiEFlééi'féFFEé'éWéE. with a r'é's'é'r'iFé'EHEWEM;EHEEéVé'féi'bossivieElisitions fé'r'fr'i'é'i'e'é'e'fié'fié'fii'ziHéEJrve. R'e'Eé'iRFé'Ei'e'fi'i'é'n'li'é'u'Fv'e 3 is mé'EkBE'ct'e'E BHéiil'o'r'f'o'r'i'tH'e' day in aUéEfiéHRHHQEHYHE'EWE" may insteadend up anywhere between curvest and 5.01herthings fixed. one wayto lowervolatility in the federal mnds rate is to: Market Federal Funds Rate Discuuun Rm: ______ __ ‘ Rcscnic Suppl}; Targa Rare ‘ c Dr?” R“ """ ' _ Ai— Rum": I)de Quam‘zy efllesrrves r lower the target rate. r raisethe discount rate r raise the target rate °a r raisethe deposit rate. Multiple Choice Section: The Federal Reserve's Conventional PolicyToolhox a w a rd: 3- I} out of 10 points Which ofthe following accurately describes the similarities or differences between the Fed and the ECEI? r Both primarily supply reserves through outright [permanent]: purchases ofgovernment securities. r Both limit downward movements in overnight interest rates, but not upward movements in rates needed to clearthe overnight market. r Both conduct open market operations in a central location, New Yorkforthe Fed and Frankfurtforthe ECS. ed r Both payinterest on reserves. MultipleClIoice Section: Operational F'olicy atthe European Central Bank a w a rd: 4- 0 out of r European Union bonds. r Germangovernmentbonds. r overnight repurchase agreements. a _. :- two week repos. MultipleChoice Section: Operational Policy at the European Central Bank award: 5_ 0 out of ............... Which ofthe following statements is false? 3‘ One condition for an intermediate targeting approach to policyto be successful is forthe link between the operating instrument and the intermediate targetto be stable r Targeting reserves ratherthan the interest rate likely raises volatility ofthe interest rate. r Targeting Interest rates ratherthan reserves likely raises volatility ofthe level of reserves °_ 3* Usrng the policy instrument to achieve the desired value ofthe intermediate target assures achievement ofthe final objective. MultipleChoice Section: Linking Tools to Objectives: Making Choices 3 w a rd: 6- 0 out of .............. Which ofthe following is an example ofan instrument ofmonetaiy policy? r The slope ofthe yield curve. a_. r The monetary base. r The inflation rate. r- The risk structure ofinterest rates. Multiple Choice Section: Linking Tools to Objectives: Making Choices a r: a rd: 7- 0 out of 10 points In the Taylor rule, a coetflcient of); on the inflation gap and [J on the output gap means that policy makers will, in response to a one percent increase in inflation: r raise the target forthe nominal rate by 50 basis points. 9* r raise the implied target forthe real interest rate by 50 basis points. 5* raise the implied target forthe real interest rate by 150 basis points. r raise the nominal interest rate target by 100 basis points. Multiple Choice Section: A Guide to Central Bank Interest Rates: The Taylor Rule award' 8 0 out of ' 10 points Suoposewe write the Taylor rule as Targetfed funds rate : 2 + Current Inflation 1-:1 (Inflation gap) + B (Output gap) where :1 Is the policy maker's response to Inflation deviations fromthe Inflation target and where fl Is the responseto output deviations from Its potential level Suppose thatthe Inflation target IsQ'De. that current Inflation Is 4'56 and thatthe output gap is 72% Letn- : 0 50 and f3 : 0 50 Thetargetforthe federal funds rate is then r‘ 750% r‘ Home r‘ same 0% r‘ 5.00% MultipleClIoIce Section A Guide to Central Bank interest Rates The Taylor Rule ar; :3 rd: 9_ 0 out of 10 points Which ofthe following statements about exit strategies from policies ofquantitative or credit easing is false? °_. t The central bank has no efiective tool to raise shortterm interest rates, its primary policy in “normal‘ economictimes. :- The level ofreserves afterquantitative andror crediteasing is so largethatsellingthese assets rapidly enough to drain reserves may be disruptive to financial markets. :- “Toxic‘ assets bought bythe central bank during credit easing may not have marketvolume large enough to allow sale ofthese assets to private investors. b An exitfrom credit easing likelywill afiect resource allocation in some markets difierently allocation in other markets. MnltipleChoice Section Unconventional F'olIcyTools aw ard: 10- Uoutof 10 points Whenthe Fed guarantees payment on commercial paper, the unconventional policytool being used is: a- quantitative easing. °_‘ F crediteasing. r unconditional policy duration commitment. F conditional policy duration commitment. MultipleClIoice Section: Unconventional F'olicyTools ...
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