Economics Questions

The Fed's mistakes of the early 1930s were compounded by its decision toA) raise reserve requirements in 1936-1937.B) lower reserve requirements in 1936-1937.C) raise the monetary base in 1936-1937.D) lower the monetary base in 1936-1937.

During World War II, whenever interest rates would ________ and the price of bonds would begin to ________, the Fed would make open market purchases.A) rise; riseB) rise; fallC) fall; riseD) fall; fall

The guiding principle for the conduct of monetary policy that held that as long as loans were being made for "productive" purposes, then providing reserves to the banking system to make these loans would not be inflationary became known as theA) free reserves doctrine.B) Benjamin Strong doctrine.C) efficient liquidity doctrine.D) real bills doctrine.

The Fed-Treasury Accord of March 1951 provided the Fed greater freedom toA) let interest rates increase.B) let unemployment increase.C) let inflation accelerate.D) let exchange rates increase.

During the 1950s, Fed monetary policy targetedA) the monetary base.B) the exchange rate.C) discount loans.D) interest rates.

During World War II, the Fed in effect relinquished its control of monetary policy through its policy ofA) continually lowering reserve requirements.B) continually raising reserve requirements.C) pegging interest rates.D) targeting free reserves.

The rate of inflation increases whenA) the unemployment rate equals the NAIRU.B) the unemployment rate exceeds the NAIRU.C) the unemployment rate is less than the NAIRU.D) the unemployment rate increases faster than the NAIRU increases.

Compared to the United States, Japan's experience with monetary targeting during the 1978-1987 period performedA) better with regard to the inflation rate and output fluctuations.B) worse with regard to the inflation rate and output fluctuations.C) better with regard to the inflation rate, but worse with regard to output fluctuations.D) worse with regard to the inflation rate, but better with regard to output fluctuations.

Which of the following is an advantage to money targeting?A) There is an immediate signal on the achievement of the target.B) It does not rely on a stable money-inflation relationship.C) It implies lack of transparency.D) It implies smaller output fluctuations.

During the years 1979 to 1982, the Federal Reserve's announced policy was monetary targeting. During this time period the Federal ReserveA) hit all of their monetary targets.B) did not hit any of their monetary targets because it is believed that controlling the money supply was not the intent of the Federal Reserve.C) did not hit any of their monetary targets because they were unrealistic.D) hit about half of their monetary targets.

The monetary policy strategy that relies on a stable money-income relationship isA) exchange-rate targeting.B) monetary targeting.C) inflation targeting.D) the implicit nominal anchor.

In its earliest years, the Federal Reserve's guiding principle for the conduct of monetary policy was known as theA) real bills doctrine.B) liberal liquidity doctrine.C) free reserves doctrine.D) quantity theory of money.

One of the factors that contributed to the success German policymakers had using a monetary targeting type policy starting in the mid-1970s and continuing through the next two decades was thatA) they used a rigid target for the money growth rate.B) they implemented policy so their inflation rate goal was met in the short run.C) the money target was flexible to allow the Bundesbank to concentrate on other goals as needed.D) they rarely communicated the intentions of policy to the public in order to keep the public from panicking.

The rate of inflation tends to remain constant whenA) the unemployment rate is above the NAIRU.B) the unemployment rate equals the NAIRU.C) the unemployment rate is below the NAIRU.D) the unemployment rate increases faster than the NAIRU increases.

The real bills doctrine was the guiding principle for the conduct of monetary policy during theA) 1910s.B) 1940s.C) 1950s.D) 1960s.

Which of the following is a disadvantage to monetary targeting?A) It relies on a stable money-inflation relationship.B) There is a delayed signal about the achievement of a target.C) It implies larger output fluctuations.D) It implies a lack of transparency.

Using Taylor's rule, when the equilibrium real federal funds rate is 3 percent, the positive output gap is 2 percent, the target inflation rate is 1 percent, and the actual inflation rate is 2 percent, the nominal federal funds rate target should beA) 5 percent.B) 5.5 percent.C) 6 percent.D) 6.5 percent.

If the Fed pursues a strategy of targeting an interest rate when fluctuations in money demand are prevalentA) fluctuations of nonborrowed reserves will be small.B) fluctuations of nonborrowed reserves will be large.C) the Fed will probably quickly abandon this policy, as it did in the 1960s.D) the Fed will probably quickly abandon this policy, as it did in the 1950s.

If the relationship between the monetary aggregate and the goal variable is weak, thenA) monetary aggregate targeting is superior to exchange-rate targeting.B) monetary aggregate targeting is superior to inflation targeting.C) inflation targeting is superior to exchange-rate targeting.D) monetary aggregate targeting will not work.

If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate, then real interest rates will ________ and monetary policy will be too ________.A) rise; tightB) rise; looseC) fall; tightD) fall; loose