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..... When the central bank enacts policies in which the interest rate falls and equity and home prices rise, policy is working through the: ea r“ asset price channel. r“ exchange rate channel. balance sheet channel. bank lending channel. MultipleChoice Section: The Monetary Policy Transmission Mechanism 5 w a rd: 2- ﬂout of 10 points
Achange in the interest rate resulting from a monetary policy action which in turn changes business investment is an example of: r- the bank lending channel.
r- the exchange rate channel.
e_. r- the interest rate channel. r- the balance sheet channel. Multiple Choice Section: The Monetary Policy Transmission Mechanism rate channel ofmonetaiypo cy oans.The bank lending cha F demandfor; demand for
r supply of;supplyof
F supply of; demand for r“ demand for; supply of _, I MultipleChoice Section: The Monetary F'olicyTransmission Mechanism award: 4- 0 out of 10 points
In a ﬁnancial crisis. closing ofinsolvent banks and laying oﬁtheir loan olﬂcers tends to harm the economy primarilythrough the:
r deterioration ofﬁrm balance sheets. 5“ deterioration ofbank balance sheets.
9* r deterioration ofinformation ﬂows. 5“ deterioration ofhousehold balance sheets. Multiple Choice Section: The Monetary Policy Transmission Mechanism a r: a rd: 5_ I) out of 10 points
In the transmission ofmonetary policy, the bank lending channel is: r“ generally unrelated to open market operations.
r“ generally beyond the reach ofregulators, who monitor stock and bond market irregularities.
°_‘ r oﬁen the only source offunds for small and medium sized ﬁrms forwhom the cost ofissuing stocks and bonds is prohibitive. r relatively unimportant since mostﬁrms can, alternatively, obtain ﬁnancing in the bond and stock markets. Multiple Choice Section: The Monetary Policy Transmission Mechanism a.
a..ar-. 6 _ 0 out of 10 points
During the ﬁnancial crisis, Fed policy ofbuying commercial paperwas a policy aimed at inﬂuencing the economy: 9_ :- directly affecting both ﬁnancial and nonﬁnancial ﬁrms.
r directly aﬁecting bank balance sheets.
r implemented through unconventional interest rate channels. :- conducted through the traditional interest rate channels. MultipleClIoice Section: The Monetary F'olicyTransmission Mechanism a r: a rd: 7_ 0 out of 10 points
There is a zero nominal-interest—rate bound since agents can always hold cash ratherthan lend at negative nominal interest rates. The real interest rate:
r falls in deﬂation when the nominal rate is atzero. p is zero when the nominal rate is zero. °_. ,F can be negative ifactual inﬂation is higherthan expected. f“ has a zero bound as well. Multiple Choice Section: The Challenges Modern Monetary Policymakers Face a '.'.' a rd: 8- Clout of ............... To avoid the problem associated with the zero nominal—interest—rate bound, policy makers need: 3* enhanced abilityto identify bubbles in advance.
3* further analysis ofthe role to be played by intermediaries in an evolving ﬁnancial structure.
3* further understanding ofmacroprudential policy options. 9* 3* development ofstrategiesto preventdetiation. Multiple Choice Section: The Challenges Modern Monetary Policymakers Face aw a rd: 9 0 out of 10 p 15
lfthe central bank is worried aboutthe potential fordeflation, which policy should it notpursue? r Announce awillingness to use quantitative easing as appropriate.
eﬁ 3* Sell shortterm bonds to keep nominal interest rates comfortany above zero.
3“ Commit to keep the short—term interest rate low so as to use the yield curve to lower long—term interest rates in an eﬁortto stimulate investment spending. r Raise its inﬂation target. MultipleChoice Section:The Challenges Modern Monetary Policymakers Face 3 '.'.' a rd: 10_ Doutof 1!} points
In the 2007—2009 credit crisis, bank balance sheets might have beneﬁted from macroprudential policies dealing with: 5* problems in the housing ﬁnance markets.
5* assetprice bubbles.
r the zero nominal-interest—rate bound. ﬁg 5* the absence ofprocyclical capital requirements. MultipleChoice Section: The Challenges Modern Monetary Policymakers Face ...
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This note was uploaded on 09/07/2011 for the course ECO 412 taught by Professor Staff during the Spring '05 term at Kentucky.
- Spring '05