Quiz 1

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Quizzes Quiz 1 Quiz 2 True or False More Resources PowerPoints Your Financial World Key Terms Glossary

Out of 17 questions, you answered 4 correctly with a final grade of 24% 4 correct (24%) 13 incorrect (76%) 0 unanswered (0%)

Your Results:
The correct answer for each question is indicated by a .

1 INCORRECT

The central bank in the United States is: A) the Bank of America. B) the U.S. Treasury. C) the Federal Reserve. D) the Bank of The United States. Feedback: LOD: 1 The Basics: How Central Banks Originated and Their Role Today.

2 INCORRECT

Many governments give their central bank control over issuing currency because: A) the only way to distribute currency to banks is through the central bank. B) having large amounts of currency can lead to lower rates of inflation. C) central banks use the profits from issuing currency to finance their operations. D) printing currency can be profitable for a government, so government officials may have a strong incentive to print too much. Feedback: LOD: 1 The Basics: How Central Banks Originated and Their Role Today.

3 CORRECT

Monetary policy in the United States is under the control of the: A) Federal Reserve. B) President. C) U. S. Treasury. D) U.S. Senate. Feedback: LOD: 1 The Basics: How Central Banks Originated and Their Role Today.

4 INCORRECT

Central banksperform each of the following EXCEPT: A) issuing currency. B) serving as the government's bank. C) controlling the availability of money and credit. D) managing fiscal policy. Feedback: LOD: 3 The Basics: How Central Banks Originated and Their Role Today.

5 CORRECT

A central bank typically: A) facilitates interbank payments.

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B) controls the money supply. C) has a monopoly in printing currency. D) All of the above are correct. E) None of the above is correct. Feedback: LOD: 1 The Basics: How Central Banks Originated and Their Role Today.

6 INCORRECT

The specific goals of central banks include each of the following EXCEPT: A) high and stable real growth. B) low and stable inflation. C) high levels of imports. D) low and stable unemployment rates. Feedback: LOD: 1 Stability: The Primary Objective of All Central Banks.

7 INCORRECT

If prices are not stable: A) money performs better as a unit of account. B) money becomes less useful as a store of value. C) it may be an inconvenience, but resources are still allocated efficiently. D) prices become less useful for conveying information. E) b and d Feedback: LOD: 2 Stability: The Primary Objective of All Central Banks.

8 CORRECT

Low and stable inflation implies: A) that the rate of inflation averaged over many years is zero (0). B) low rates of economic growth. C) that the rate of inflation year after year is low. D) low rates of unemployment. Feedback: LOD: 2 Stability: The Primary Objective of All Central Banks.

9 INCORRECT

Everything else equal, if the growth rate of a country exceeds its sustainable rate, then the central bank: A) will keep interest rates low to keep the momentum. B) is likely to raise interest rates to slow the rate of growth. C) will now identify this new rate as the sustainable rate and try to maintain it. D) is likely to lower the interest rate thinking a slowdown is coming to offset this boom. Feedback: LOD: 2 Stability: The Primary Objective of All Central Banks.

10 INCORRECT

The Fed and other central banks often have a positive, rather than a zero, inflation rate target because: A) a zero inflation rate target introduces a risk of deflation. B) economic growth is higher when inflation is higher. C) politicians prefer having a higher inflation rate because this raises incomes and purchasing power for everyone. D) None of the above is correct. Feedback: LOD: 2 Stability: The Primary Objective of All Central Banks.

11 INCORRECT

Successful monetary policy relies on:

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A) luck. B) the institutional environment. C) competent people in responsible positions. D) knowledgeable citizens who know how to react to the policy. E) b and c Feedback: LOD: 2 Meeting the Challenge: Creating a Successful Central Bank.

12 INCORRECT

The idea that central banks should be independent of political pressure is an idea that: A) the Federal Reserve Act included in 1913. B) is relatively new. C) every central bank was founded upon. D) became quite popular in the early 1900s. E) a and c Feedback: LOD: 1 Meeting the Challenge: Creating a Successful Central Bank.

13 CORRECT

The operational components required for truly independent central banks include: A) monetary policies that cannot be reversed by anyone outside of the central bank. B) the ability to have policies reversed. C) a budget controlled by Congress. D) the chairperson of the bank being answerable only to the president. E) a and d Feedback: LOD: 2 Meeting the Challenge: Creating a Successful Central Bank.

14 INCORRECT

One argument for an independent central bank is: A) without independence, competent people would not take a position in a central bank. B) successful monetary policy requires a long time horizon; one that is usually well beyond the next election of most public officials. C) politicians have a long-run focus that is not well tuned to addressing economic problems. D) central bankers have a short-run focus that usually corrects problems faster. Feedback: LOD: 2 Meeting the Challenge: Creating a Successful Central Bank.

15 INCORRECT

The means for assuring accountability and transparency: A) are the same for all successful central banks. B) are different across the central banks of most countries. C) involve setting specific numerical targets so there is no confusion as to what the goal is. D) All of the above. E) Only a and c Feedback: LOD: 1 Meeting the Challenge: Creating a Successful Central Bank.

16 INCORRECT

One reason given for more central bankers releasing their decisions publicly is: A) to let the public debate the appropriateness of monetary policy decisions. B) most people do not understand monetary policy, so it really doesn't do any harm to release the decisions publicly. C) that for monetary policy to be stabilizing, speculation about central bankers decisions should be minimized. D) so that central banks across the world can coordinate their policies.

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E) All of the above. Feedback: LOD: 2 Meeting the Challenge: Creating a Successful Central Bank.

17 INCORRECT

One thing that is true about economic policy in the U.S. is that: A) monetary and fiscal policy often times conflict. B) fiscal and monetary policy never conflict. C) monetary policy ultimately controls fiscal policy since the Fed controls the money supply. D) fiscal policy ultimately controls monetary policy since Congress can control the Fed's budget. Feedback: LOD: 1 Fitting Everything Together: Central Banks and Fiscal Policy.

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