CHAP018 - Chapter 18 Monetary Policy Multiple Choice...

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Chapter 18 Monetary Policy Multiple Choice Questions 1. The focus for most central banks today is: A) The quantity of M1 B) Interest rates. C) The quantity of M2. D) Controlling the size of the money multiplier. Answer: B LOD: 1 Page: 460 A-Head: The Federal Reserve's Monetary Policy Toolbox. 2. In 2002, the Fed changed their approach for lending to banks to: A) Lending primarily only to banks that are in trouble. B) Charging an interest rate well below the federal funds rate. C) Lending to banks known to be in good shape at a rate well above the federal funds rate. D) a and b Answer: C LOD: 1 Page: 461 A-Head: The Federal Reserve's Monetary Policy Toolbox. 3. The ways the Fed can inject reserves into the banking system include: A) An increase in the size of the Fed's balance sheet through purchasing securities. B) Increasing the discount rate. C) Making loans to banks. D) b and c E) a and c Answer: E LOD: 1 Page: 461 A-Head: The Federal Reserve's Monetary Policy Toolbox. 4. Which of the following statements is most correct? A) The Fed can control the amount of reserves. B) The Fed can control the make up of the monetary base. C) The Fed can control the size of the monetary base but not the price of its components. D) The Fed can control the size of the monetary base and the price of its components. Answer: D Page: 461 A-Head: The Federal Reserve's Monetary Policy Toolbox. 536 Cecchetti: Money, Banking, and Financial Markets
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Chapter 18 Monetary Policy 5. The tools of monetary policy available to the Fed include each of the following, except: A) The currency to deposit ratio. B) The discount rate. C) The target federal funds rate. D) The reserve requirement. Answer: A LOD: 1 Page: 461 A-Head: The Federal Reserve's Monetary Policy Toolbox. 6. The tools of monetary policy include: A) The target federal funds rate. B) The excess reserve rate. C) The currency to deposit ratio. D) All of the above Answer: A LOD: 1 Page: 461 A-Head: The Federal Reserve's Monetary Policy Toolbox. 7. The primary policy instrument of the Federal Open Market Committee (FOMC) is: A) The required reserve rate. B) The discount rate. C) The target federal funds rate. D) The exchange rate. Answer: C LOD: 1 Page: 462 A-Head: The Federal Reserve's Monetary Policy Toolbox. 8. Which of the following statements is most correct? A) The FOMC sets the federal funds rate. B) The discount rate is the primary policy tool of the FOMC. C) The FOMC sets the target federal funds rate. D) The difference between the target and actual federal funds rate is the dealer's spread. E) None of the statements are correct. Answer: C Page: 462 A-Head: The Federal Reserve's Monetary Policy Toolbox. 537 Cecchetti: Money, Banking, and Financial Markets
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Chapter 18 Monetary Policy 9. The market for reserves derives from the fact that: A) Reserves pay a relatively high return. B) Desired reserves don't always equal actual reserves.
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This note was uploaded on 02/12/2012 for the course ECON 101 taught by Professor Abrams during the Spring '11 term at Adams State University.

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CHAP018 - Chapter 18 Monetary Policy Multiple Choice...

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