Econ Final Practice

Econ Final Practice - Econ2035Money,Banking,,Spring2009...

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Econ 2035 Money, Banking, and Macroeconomic Activity, Spring 2009 Sample Midterm 4 Multiple-choice Questions: Choose the one alternative that best completes the statement or answers the question. 1. A central feature of monetary policy strategies in all countries is the use of a nominal anchor, which is a nominal variable that monetary policymakers use as an a. intermediate target to achieve an ultimate goal such as price stability. b. intermediate target, such as the federal funds interest rate. c. operating target, such as the federal funds interest rate. d. operating target to achieve an ultimate goal such as exchange rate stability. 2. The theory that monetary policy conducted on a discretionary, day‐by‐day basis leads to poor long‐run outcomes is referred to as the 3. Fluctuations in the demand for reserves cause the Fed to lose control over a monetary aggregate if the Fed targets 4. Which of the following is not a disadvantage to inflation targeting? 5. Which of the following is a potential operating instrument for the central bank? a. The discount rate b. The M1 money supply c. Nominal GDP d. The monetary base 6. Although the Fed professed employment of ________ targeting during the 1970s, its behavior suggests that it emphasized ________ targeting.
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7. If the desired intermediate target is a monetary aggregate, then the preferred policy instrument will be a(n) ________ variable like the ________. 8. The decision by inflation targeters to choose inflation targets ________ zero reflects the concern of monetary policymakers that particularly ________ inflation can have substantial negative effects on real economic activity.
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