Exam 13: Central Banking and Monetary Policy: Exploring Tools and Strategies

The GDP gap represents an important measure of economic performance.

Ideally, today's central bank monetary policy should be targeted at next year's anticipated economic problems (especially inflation).

Discount window loans to depository institutions are neutral in their effects on the quantity of reserves available to the banking system; these loans neither increase nor decrease the total supply of reserves.

If less monetary restraint is needed, the Fed's Trading Desk will sell securities until nonborrowed reserves decline by an amount the Federal Reserve has targeted.

Reserves of the banking system are an important target of central bank policy because, left alone, bankers could increase the quantity of reserves available to them virtually without limit.

When the Fed replaces maturing Treasury securities with new issues, security prices will tend to rise and interest rates will tend to fall.

The SOMA manager uses all of the following information except ____ in determining the quantity of securities to buy or sell.

Recently, the Federal Reserve adopted a new policy of "openness" when it comes to announcing its target for the Federal funds interest rate, letting the public know right away when it is moving the funds-rate target level.

Defensive open-market transactions represent day-to-day activities of the Fed and include all of the following except:

If total legal reserves are $200 billion and nonborrowed reserves are $150 billion, borrowed reserves must equal $350 billion.

The public's spending decisions appear to be most affected by:

Hyperinflation is when the annual inflation rate exceeds 200%.

Regardless of the nature of the loan there is only one discount rate that the Federal Reserve quotes on all loans from its discount window.

The type of open-market operation that permanently changes title to the securities traded and makes a permanent change in the level of reserves held by depository institutions is known as a(n):

The federal funds rate is usually the first to "feel" the effect of open market operations because:

If an increased discount rate remains below other money market interest rates, the cost effect will cause:

Describe the effects of the credit crisis of 2007-2009 on the powers and policies of the Federal Reserve.

The United States Congress started to alter or repeal many of the Depression era regulations put in place on banking in:

With fewer depository institutions in debt to the Federal Reserve banks, there will be a tendency for depository institutions to decrease their lending activities.

If the Federal Reserve receives and acts on a request from a foreign central bank to acquire securities from private dealers, this will result in a rise in total reserves of the U.S. banking system.