b. low and stable inflation. c. low and stable deflation. d. an inflation rate of zero percent. 2. Price stability is desirable because ________
a. it guarantees full employment.
b. everyone is better off when prices are stable. c. price stability increases the profitability of the Fed. d. inflation creates uncertainty, making it difficu lt to plan for the future. 3. Inflation results in ______________
a.difficulty interpreting relative price
movements. b.lower nominal interest rates. c.ease of comparing prices over time. d.ease of planning for the future. 1. While the discount rate is ʺestablishedʺ by the regional Fed eral Reserve Banks, in truth, the rate is determined by __________ a. Congress. b. The Board of Governors. c. The president of the United States. d. The Senate. 1. Both ________ and ________ are Federal Reserve assets. a. government securities; discount loans b. currency in circulation; reserves c. government securities; reserves d. currency in circulation; government securities 1. The sum of the Federal monetary liabilities and the U.S. Tre asuryʹs monetary liabilities is called __________ a. the monetary base. b. currency in circulation. c. bank reserves. d. the money supply. 1. When banks borrow money from the Federal Reserve, thes e funds are called ____________ a. discount loans b. federal funds c. treasury funds d. federal loans 1. The Fed does not tightly control the monetary base because it does not completely control a. the discount rate. b. open market sales. c. open market purchases. d. borrowed reserves. 1. Which set of goals can, at times, conflict in the short run? a. Exchange rate stability and financial market stability. b. High employment and price level stability. c. Interest rate stability and financial market stability. d. High employment and economic growth. 1. The primary goal of the Philippine Central Bank is ________ a. interest rate stability. b. price stability. c. exchange rate stability. d. high employment. e. All of the above 1. All ________ are required to be members of the Fed. a. banks with assets less than P500 million b. banks with assets less than P100 million c. state-chartered bank d. nationally chartered banks 1. Goal independence is the ability of ________ to set moneta ry policy ________. a. congress; goals b. congress; instruments c. the central bank; instruments d. the central bank; goal 1. The monetary base consists of ____________ a. reserves and Federal Reserve Notes. b. currency in circulation and Federal Reserve notes. c. currency in circulation and reserves. d. currency in circulation and the U.S. Treasuryʹs monetary liab ilities. 1. The interest rate charged on overnight loans of reserves bet ween banks is the _____ a. prime rate b. federal funds rate c. discount rate d. treasury bill rate. 1. The Federal Reserve usually keeps the discount rate _____________ a. blow the target federal funds rate. b. equal to zero. c. above the target federal funds rate d. equal to the target federal funds rate. 1. Discount policy affects the money supply by affecting the vo lume of ________ and the ________. a. excess reserves; monetary base b. excess reserves; money multiplier c. borrowed reserves; monetary base d. borrowed reserves; money multiplier 1. What is the discount rate? a. the price the Fed pays for government securities. b. the interest rate that banks charge their most preferred cust omers. c. the interest rate the Fed charges on loans to banks. d. the price banks pay the Fed for government securities. 1. The most common type of discount lending that the Fed ext ends to banks is called ____________ a. seasonal credit. b. installment credit. c. secondary credit. d. primary credit. 1. The most common type of discount lending, ________credi t loans, are intended to help healthy banks with short- term liquidity problems that often result from temporary de posit outflows. a. temporary b. seasonal c. primary d. secondary 1. The discount rate refers to the interest rate on _________ a. seasonal credit. b. primary credit. c. secondary credit. d. federal funds. 1. A decrease in ________ increases the money supply since it causes the ________ to rise. a. margin requirements; money multiplier b. margin requirements; monetary base c. reserve requirements; money multiplier d. reserve requirements; monetary base 1. The most important advantage of the discount policy is that the Fed can use it to __________ a. precisely control the monetary base. b. control the money supply. c. perform its role as lender of last resort. d. punish banks that have deficient reserve 1. The interest rate on seasonal credit is equal to _______ a. the primary credit rate. b. an average of the federal funds rate and rates on certificate s of deposits. c. the federal funds rate. d. the secondary credit rate. 1. Which of the following would Fed consider eliminating? a. primary credit lending. b. its lender of last resort function c. secondary credit lending. d. seasonal credit lending. 1. Under monetary targeting, a central bank announces an an nual growth rate target for ________. a. a reserve aggregate b. the monetary base c. a monetary aggregate d. GDP 1. Which of the following is a disadvantage to monetary target ing? 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. 1. The monetary policy strategy that relies on a stable money- income relationship is ________________ a. monetary targeting. b. exchange-rate targeting. c. the implicit nominal anchor. d. inflation targeting. 1. The type of monetary policy that is used in Canada, New Ze aland, and the United Kingdom is _________ a. inflation targeting. b. interest-rate targeting. c. targeting with an implicit nominal anchor. d. monetary targeting. 1. Which of the following is not an element of inflation targeting? a. An institutional commitment to price stability as the primar y long-run goal b. A public announcement of medium term numerical targets for inflation c. Increased accountability of the central bank for attaining its inflation objectives d. An information- inclusive approach in which only monetary aggregates are u sed in making decisions about monetary policy 1. Which of the following is NOT an advantage of inflation targeting? a. There is an immediate signal on the achievement of the targ et. b. Inflation targeting does not rely on a stable money- inflation relationship. c. There is simplicity and clarity of the target. d. Inflation targeting reduces the effects of inflation shocks. 1. Which of the following is an advantage to money targeting? a. It does not rely on a stable money-inflation relationship. b. There is an immediate signal on the achievement of the targ et. c. It implies lack of transparency. d. It implies smaller output fluctuations. 1. Which of the following is NOT a disadvantage to inflation tar geting? a. Inflation targets could impose a rigid rule on policymakers. b. There is potential for larger output fluctuations. c. There is a lack of transparency. d. There is a delayed signal about the achievement of the target. 1. A decrease in ________ increases the money supply since it causes the ________ to rise. a. margin requirements; money multiplier b. reserve requirements; monetary base c. margin requirements; monetary base d. reserve requirements; money multiplier 1. Which is not included in six basic goals that are continually mentioned by personnel at the Central Bank? a. High employment b. stability in foreign exchange markets c. High unemployment d. stability of financial markets 1. The stability of financial markets is also fostered by ________________, because fluctuations in interest rates create great uncertainty for financial institutions. a. interest-rate stability b. structural unemployment c. economic growth d. price stability 1. Due to the lack of timely data for the price level and econo mic growth, the Central Bankʹs strategy _________ a. targets the price of gold, since it is closely related to econo mic activity. b. targets the exchange rate, since the Fed can control this vari able. c. stabilizes the consumer price index, since the Fed can contr ol the CPI. d. uses an intermediate target, such as an interest rate. 1. The monetary base minus currency in circulation equals _______ a. discount loans. b. the borrowed base. c. reserves. d. the non-borrowed base. 1. The ability of a central bank to set monetary policy goals is ____________ a. policy independence. b. political independence. c. goal independence. d. instrument independence. 1. Which of the following is not an operating instrument? a. Federal funds interest rate b. Non-borrowed reserves c. Monetary base d. Discount rate DECEMBER DREAM
I see your smiling face in my December dream
I hear the laughter and the sound of children singing The winter’s night you watch the fire glow To dream contented our hearts aglow
I always see you there in my December dream
And then I realize another year is ending The touch of Santa’s hand is there to dream again For I have you to make my dream come true