Question 1

The natural rate of unemployment ________.

Accepted Answer

A)  is consistent with full employment 
B)  is equal to zero 
C)  equals structural employment 
D)  is the same as frictional employment 
A)  is consistent with full employment 
B)  is equal to zero 
C)  equals structural employment 
D)  is the same as frictional employment

Question 2

The type of monetary policy that is used in Canada, New Zealand, and the United Kingdom is ________.

Accepted Answer

A)  monetary targeting 
B)  inflation targeting 
C)  targeting with an implicit nominal anchor 
D)  interest-rate targeting 
A)  monetary targeting 
B)  inflation targeting 
C)  targeting with an implicit nominal anchor 
D)  interest-rate targeting

Question 3

During the 1982-1988 period, the Bank of Canada ________.

Accepted Answer

A)  looked at a list of factors in order to design and implement monetary policy 
B)  switched its focus to a range of broad monetary aggregates, but no aggregate was found suitable as a guide for conducting monetary policy 
C)  A and B only. 
D)  None of the above. 
A)  looked at a list of factors in order to design and implement monetary policy 
B)  switched its focus to a range of broad monetary aggregates, but no aggregate was found suitable as a guide for conducting monetary policy 
C)  A and B only. 
D)  None of the above.

Question 4

During the 1975-1981 period, although the Bank of Canada was successful in keeping actual M1 growth within the target range, ________.

Accepted Answer

A)  the inflation rate by the end of the 1970s was almost at the same level as when monetary gradualism was introduced in 1975 
B)  the inflation rate remained high 
C)  the demand for M1 became unstable 
D)  All of the above. 
A)  the inflation rate by the end of the 1970s was almost at the same level as when monetary gradualism was introduced in 1975 
B)  the inflation rate remained high 
C)  the demand for M1 became unstable 
D)  All of the above.

Question 5

Which of the following countries have hierarchical mandates?

Accepted Answer

A)  Reserve Bank of New Zealand 
B)  Bank of Canada 
C)  Bank of England 
D)  all of the above 
A)  Reserve Bank of New Zealand 
B)  Bank of Canada 
C)  Bank of England 
D)  all of the above

Question 6

In the 1975-1981 period, the Bank of Canada selected an interest rate as an operating target than a reserve aggregate primarily because it ________.

Accepted Answer

A)  had no interest in targeting a monetary aggregate, as evidenced by its unwillingness to target a reserve aggregate 
B)  was still very concerned with interest rate stability 
C)  was committed to the real bills doctrine 
D)  was committed to keeping the foreign exchange and domestic bonds markets functioning smoothly 
E)  None of the above 
A)  had no interest in targeting a monetary aggregate, as evidenced by its unwillingness to target a reserve aggregate 
B)  was still very concerned with interest rate stability 
C)  was committed to the real bills doctrine 
D)  was committed to keeping the foreign exchange and domestic bonds markets functioning smoothly 
E)  None of the above

Question 7

Why has the ECB seemed to have decided to try to "have its cake and eat it, too"?

Accepted Answer

The ECB's strategy is somewhat unclear a

Question 8

Peak inflation in the United Kingdom was ________ in ________.

Accepted Answer

A)  9 percent; 1991 
B)  4 percent; 1997 
C)  12 percent; 1991 
D)  8 percent; 1995 
A)  9 percent; 1991 
B)  4 percent; 1997 
C)  12 percent; 1991 
D)  8 percent; 1995

Question 9

Using Taylor's rule, when the equilibrium real overnight 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 overnight rate should be ________.

Accepted Answer

A)  0 percent 
B)  1 percent 
C)  2 percent 
D)  3 percent 
A)  0 percent 
B)  1 percent 
C)  2 percent 
D)  3 percent

Question 10

During the years 1979 to 1982, the Federal Reserve's announced policy was monetary targeting. During this time period the Federal Reserve ________.

Accepted Answer

A)  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 
A)  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

Question 11

The rate of inflation tends to remain constant when ________.

Accepted Answer

A)  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 
A)  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

Question 12

In the 1975-1981 period, the Bank of Canada used ________ as the intermediate target of monetary policy.

Accepted Answer

A)  the growth rate of M1 
B)  the growth rate of M2 
C)  the interest rate 
D)  the exchange rate 
A)  the growth rate of M1 
B)  the growth rate of M2 
C)  the interest rate 
D)  the exchange rate

Question 13

Which of the following is an advantage to monetary targeting?

Accepted Answer

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. 
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.

Question 14

Inflation targeting has the potential to reduce the likelihood that the central bank will fall into the time-inconsistency trap of trying to ________ output and employment in the short run by pursuing overly ________ monetary policy.

Accepted Answer

A)  lower; tight 
B)  expand; expansionary 
C)  lower; expansionary 
D)  expand; tight 
A)  lower; tight 
B)  expand; expansionary 
C)  lower; expansionary 
D)  expand; tight

Question 15

Due to the lack of timely data for the price level and economic growth, the Bank of Canada's strategy ________.

Accepted Answer

A)  targets the exchange rate, since the Bank of Canada 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 Bank of Canada can control the CPI 
A)  targets the exchange rate, since the Bank of Canada 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 Bank of Canada can control the CPI

Question 16

Did the Great Moderation protect economies from financial instability.

Accepted Answer

No, The apparent stability of

Question 17

Why might a policy of low interest rates encourage excessive risk taking?

Accepted Answer

When yields on safe investment

Question 18

Which of the following criteria need not be satisfied for choosing an intermediate target?

Accepted Answer

A)  The variable must be measurable. 
B)  The variable must be controllable. 
C)  The variable must be predictable. 
D)  The variable must be stable. 
A)  The variable must be measurable. 
B)  The variable must be controllable. 
C)  The variable must be predictable. 
D)  The variable must be stable.

Question 19

What are the disadvantages inflation targeting?

Accepted Answer

The disadvantages of inflation targeting

Question 20

Did the financial crisis reveal that developments in the financial sector were less important than previously thought?

Accepted Answer

No. Financial developments had

Exam 17: The Conduct of Monetary Policy: Strategy and Tactics

The natural rate of unemployment ________.

The type of monetary policy that is used in Canada, New Zealand, and the United Kingdom is ________.

During the 1982-1988 period, the Bank of Canada ________.

During the 1975-1981 period, although the Bank of Canada was successful in keeping actual M1 growth within the target range, ________.

Which of the following countries have hierarchical mandates?

In the 1975-1981 period, the Bank of Canada selected an interest rate as an operating target than a reserve aggregate primarily because it ________.

Why has the ECB seemed to have decided to try to "have its cake and eat it, too"?

Peak inflation in the United Kingdom was ________ in ________.

Using Taylor's rule, when the equilibrium real overnight 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 overnight rate should be ________.

During the years 1979 to 1982, the Federal Reserve's announced policy was monetary targeting. During this time period the Federal Reserve ________.

The rate of inflation tends to remain constant when ________.

In the 1975-1981 period, the Bank of Canada used ________ as the intermediate target of monetary policy.

Which of the following is an advantage to monetary targeting?

Inflation targeting has the potential to reduce the likelihood that the central bank will fall into the time-inconsistency trap of trying to ________ output and employment in the short run by pursuing overly ________ monetary policy.

Due to the lack of timely data for the price level and economic growth, the Bank of Canada's strategy ________.

Did the Great Moderation protect economies from financial instability.

Why might a policy of low interest rates encourage excessive risk taking?

Which of the following criteria need not be satisfied for choosing an intermediate target?

What are the disadvantages inflation targeting?

Did the financial crisis reveal that developments in the financial sector were less important than previously thought?

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Filters

Peak inflation in the United Kingdom was in .

Inflation targeting has the potential to reduce the likelihood that the central bank will fall into the time-inconsistency trap of trying to output and employment in the short run by pursuing overly monetary policy.