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

When the nation's economy is producing less output in the form of goods and services, generating lower incomes and creating fewer jobs, which is underperforming relative to its capability, it is referred to as:

The Federal Reserve refuses to pay interest on monies held on reserve.

A sale of securities by the Fed will increase total legal reserves.

Inflation exists when the average prices of goods and services in the economy is on the rise.

Legal reserves that a depository institution in the U.S. is required to hold consist of:

In the 1970s and 1980s the natural unemployment rate rose to around 6 1/4 percent, because of baby boomers and the entry into the workforce by women.

What are the principal economic goals of the Federal Reserve System? How could the Fed cause changes in the rate of inflation? In unemployment and economic growth? In the nation's balance-of-payments position?

In 1940 the United States Congress started to undo many of the Depression-era regulations of the banking system, which were imposed because many blamed the banks for the Depression.

Using statistical methods the Federal Reserve creates a measure of what the level of the real GDP would be if the economy were fully utilizing its economic resources of capital, labor and entrepreneurial talent in an efficient manner and this is referred to as:

The principal immediate target of policy for most central banks consists of the volume of reserves available to the banking system.

Borrowing at the Federal Reserve discount window is:

The Bank of Canada uses deposit reserve requirements as its principal monetary policy tool today.

The Federal Reserve determines the direction of interest rate changes and the level of interest rates in the nation's financial system.

Which of the following is not related to the central banks' goal of controlling inflation?

The spread between the discount rate and other money market rates determine the strength of:

As a result of the transactions listed below, describe what is likely to happen to interest rates, deposits, and total bank reserves : a. The Federal Reserve sells $21 million in securities from its own portfolio to a foreign central bank. b. The Federal Reserve buys $37 million in securities for its own portfolio that are being offered for sale by a foreign central bank. c. The Federal Reserve declines the U.S. Treasury's offer to roll over $150 million in Treasury notes that are maturing in the Fed's own portfolio in exchange for new Treasury notes; instead the Federal Reserve demands cash from the Treasury.

Using the the description or the definition below, identify each of the terms and concepts from this chapter. a. Monetary policy tools affecting the whole economy and financial system. b. Monetary policy tools that affect specific groups or sectors of the economy. c. Percentage of legal reserves depository institutions must hold behind the deposits they receive from the public. d. Annual percentage loan rate quoted by each of the Federal Reserve banks.

Most discount window loans require the bank that is borrowing to present collateral.

Changes in the Federal Reserve's discount rate affect:

Cost, substitution and announcement effects are related to: