Economics Questions

When it comes to choosing an policy instrument, both the ________ rate and ________ aggregates are measured accurately and are available daily with almost no delay.A) three-month T-bill; monetaryB) three-month T-bill; reserveC) federal funds; monetaryD) federal funds; reserve

The European Central Bank (ECB) pursues a hybrid monetary policy strategy that has elements in common with the ________-targeting strategy previously used by the Bundesbank but also includes some elements of ________ targeting.A) monetary; inflationB) inflation; monetaryC) monetary; exchange rateD) monetary; nominal GDP

In pursuing a strategy of monetary targeting, the central bank announces that it will achieve a certain value (the target) of the annual growth rate of aA) a monetary aggregate.B) a reserve aggregate.C) the monetary base.D) GDP.

Due to the lack of timely data for the price level and economic growth, the Fed's strategyA) targets the exchange rate, since the Fed can control this variable.B) targets the price of gold, since it is closely related to economic activity.C) uses an intermediate target, such as an interest rate.D) stabilizes the consumer price index, since the Fed can control the CPI.

Which of the following is NOT a requirement in selecting a policy instrument?A) measurabilityB) controllabilityC) flexibilityD) predictability

Using Taylor's rule, when the equilibrium real federal funds rate is 2 percent, there is no output gap, the actual inflation rate is zero, and the target inflation rate is 2 percent, the nominal federal funds rate should beA) 0 percent.B) 1 percent.C) 2 percent.D) 3 percent.

Real interest rates are difficult to measure becauseA) data on them are not available in a timely manner.B) real interest rates depend on the hard-to-determine expected inflation rate.C) they fluctuate too often to be accurate.D) they cannot be controlled by the Fed.

Which of the following is a potential operating instrument for the central bank?A) the monetary baseB) the M1 money supplyC) nominal GDPD) the discount rate

According to the Taylor Principle, when the inflation rate rises, the nominal interest rate should be ________ by ________ than the inflation rate increase.A) increased; moreB) increased; lessC) decreased; moreD) decreased; less

According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation ________ the Fed's inflation target or when real GDP ________ the Fed's output target.A) rises above; drops belowB) drops below; drops belowC) rises above; rises aboveD) drops below; rises above

If the central bank targets a monetary aggregate, it is likely to lose control over the interest rate becauseA) of fluctuations in the demand for reserves.B) of fluctuations in the consumption function.C) bond values will tend to remain stable.D) of fluctuations in the business cycle.

Fluctuations in the demand for reserves cause the Fed to lose control over a monetary aggregate if the Fed targetsA) a monetary aggregate.B) the monetary base.C) an interest rate.D) nominal GDP.

Which of the following criteria need NOT be satisfied for choosing a policy instrument?A) The variable must be measurable.B) The variable must be controllable.C) The variable must be predictable.D) The variable must be transportable.

Suppose interest rates are kept very low for a long time such that there is a spike in the amount of lending. Everything else held constant, this could cause ________ bubble.A) an irrational exuberanceB) a credit-drivenC) a stockD) a debt-driven

The FOMC finally moved to ________ on January 25, 2012, when it issued its "Statement on Long-Run Goals and Monetary Policy Strategy."A) inflation targetingB) zero inflation policyC) "just do it" policyD) monetary targeting

A central bank has ________ chance to identify a credit-driven bubble compared to an irrational exuberance bubble.A) a greaterB) less of aC) about the same level of aD) a greater, less or about the same level of a

The FOMC "Statement on Long-Run Goals and Monetary Policy Strategy"made it clear that the Federal Reserve would be pursuing ________, consistent with its dual mandate.A) a flexible form of inflation targetingB) a strict form of inflation targetingC) a zero inflation targetingD) an implicit inflation targeting

The "Greenspan doctrine"—central banks should not try to prick bubbles—was based on which of the following arguments?A) Asset-price bubbles are nearly impossible to identify.B) Monetary actions would be likely to affect asset prices in general, rather than the specific assets that are experiencing a bubble.C) Raising interest rates has often been found to cause a bubble to burst more severely.D) Monetary policy actions to prick bubbles can have harmful effects on the aggregate economy.E) All of the above.

Which of the following is NOT an operating instrument?A) nonborrowed reservesB) monetary baseC) federal funds interest rateD) discount rate

________ bubble is driven entirely by unrealistic optimistic expectations.A) An irrational exuberanceB) A credit-drivenC) A stockD) A debt-driven