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The most common definition that monetary policymakers use for price stability is
Price stability is desirable because
Inflation results in
Economists believe that countries recently suffering hyperinflation have experienced
A nominal variable, such as the inflation rate or the money supply, which ties down the price level to achieve price stability is called ________ anchor.
A central feature of monetary policy strategies in all countries is the use of a nominal variable that monetary policymakers use as an intermediate target to achieve an ultimate goal such as price stability. Such a variable is called a nominal
A central feature of monetary policy strategies in all countries is the use of a nominal anchor, which is a nominal variable that monetary policymakers use as an
A nominal anchor promotes price stability by
Monetary policy is considered time-inconsistent because
The time-inconsistency problem with monetary policy tells us that, if policymakers use discretionary policy, there is a higher probability that the ________ will be higher, compared to policy makers following a behavior rule.
The theory that monetary policy conducted on a discretionary, day-by-day basis leads to poor long-run outcomes is referred to as the
The ________ problem of discretionary policy arises because economic behavior is influenced by what firms and people expect the monetary authorities to do in the future.
If the central bank pursues a monetary policy that is more expansionary than what firms and people expect, then the central bank must be trying to
The time-inconsistency problem in monetary policy can occur when the central bank conducts policy
Explain the time-inconsistency problem. What is the likely outcome of discretionary policy? What are the solutions to the time-inconsistency problem?
Even if the Fed could completely control the money supply, monetary policy would have critics because
High unemployment is undesirable because it
When workers voluntarily leave work while they look for better jobs, the resulting unemployment is called
Unemployment resulting from a mismatch of workersʹ skills and job requirements is called
The goal for high employment should be a level of unemployment at which the demand for labor equals the supply of labor. Economists call this level of unemployment the
Supply-side economic policies seek to
The Federal Reserve System was created to
Foreign exchange rate stability is important because a decline in the value of the domestic currency will ________ the inflation rate, and an increase in the value of the domestic currency makes domestic industries ________ competitive with competing foreign industries.
Which set of goals can, at times, conflict in the short run?
The primary goal of the European Central Bank is
The mandate for the monetary policy goals that has been given to the European Central Bank is an example of a ________ mandate.
The mandate for the monetary policy goals that has been given to the Federal Reserve System is an example of a ________ mandate.
Either a dual or hierarchial mandate is acceptable as long as ________ is the primary goal in the ________.
The publicʹs fear of centralized power and distrust of moneyed interests led to the demise of the first two experiments in central banking:
The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that
What makes the Federal Reserve so unique compared to other central banks around the world is its
Which of the following is NOT an entity of the Federal Reserve System?
Which of the following is an entity of the Federal Reserve System?
The three largest Federal Reserve banks (New York, Chicago, and San Francisco) combined hold more than ________ percent of the assets of the Federal Reserve System.
The Federal Reserve Banks are ________ institutions since they are owned by the ________.
Each Federal Reserve bank has nine directors. Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors.
The nine directors of the Federal Reserve Banks are split into three categories: ________ are professional bankers, ________ are leaders from industry, and ________ are to represent the public interest and are not allowed to be officers, employees, or stockholders of banks.
Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually.
The Federal Reserve Bank of ________ plays a special role in the Federal Reserve System because it houses the open market desk.
The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee?
An important function of the regional Federal Reserve Banks is
Which of the following functions are not performed by any of the twelve regional Federal Reserve Banks?
All ________ are required to be members of the Fed.
Of all commercial banks, about ________ percent belong to the Federal Reserve System.
Prior to 1980, member banks left the Federal Reserve System due to
The Fedʹs support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its
Banks subject to reserve requirements set by the Federal Reserve System include
The Depository Institutions Deregulation and Monetary Control Act of 1980
There are ________ members of the Board of Governors of the Federal Reserve System.
Members of the Board of Governors are
Each governor on the Board of Governors can serve
The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________ term.
While the discount rate is ʺestablishedʺ by the regional Federal Reserve Banks, in truth, the rate is determined by
Which of the following are duties of the Board of Governors of the Federal Reserve System?
Which of the following are not current duties of the Board of Governors of the Federal Reserve System?
The Federal Open Market Committee usually meets ________ times a year.
The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the
The Federal Open Market Committee consists of the
The majority of members of the Federal Open Market Committee are
Each Fed bank president attends FOMC meetings; although only ________ Fed bank presidents vote on policy, all ________ provide input.
Although neither ________ nor the ________ are officially set by the Federal Open Market Committee, decisions concerning these policy tools are effectively made by the committee.
The research document given to the Federal Open Market Committee that contains information on the state of the economy in each Federal Reserve district is called the
The research document given to the Federal Open Market Committee that contains the forecast of national economic variables for the next two years is called the
The research document given to the Federal Open Market Committee that contains forecasts of the money aggregates conditional on different monetary policy stances is called the
The Federal Open Market Committeeʹs ʺbalance of risksʺ is an assessment of whether, in the future, its primary concern will be
Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?
Who are the voting members of the Federal Open Market Committee and why is this committee important? Where does the power lie within this committee?
Instrument independence is the ability of ________ to set monetary policy ________.
The ability of a central bank to set monetary policy instruments is
Goal independence is the ability of ________ to set monetary policy ________.
The ability of a central bank to set monetary policy goals is
Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to
Explain two concepts of central bank independence. Is the Fed politically independent? Why do economists think central bank independence is important?
Under the European System of Central Banks, the Executive Board is similar in structure to the ________ of the Federal Reserve System.
Under the European System of Central Banks, the Governing Council is similar in structure to the ________ of the Federal Reserve System.
Under the European System of Central Banks, the National Central Banks have the same role as the ________ of the Federal Reserve System.
Members of the Executive Board of the European System of Central Banks are appointed to ________ year, nonrenewable terms.
Which of the following statements comparing the European System of Central Banks and the Federal Reserve System is TRUE?
The Governing Council usually meets ________ times a year.
In the Governing Council, the decision of what policy to implement is made by
As of the beginning of the year 2009, there are ________ countries that have representation on the Governing Council.
The central bank which is generally regarded as the most independent in the world because its charter cannot be changed by legislation is the
Explain the similarities and differences between the European System of Central Banks and the Federal Reserve System.
On paper, the Bank of Canada has ________ instrument independence and ________ goal independence when compared to the Federal Reserve System.
The oldest central bank, having been founded in 1694, is the
While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy, its critics contend that its independence is
The trend in recent years is that more and more governments
Which of the following statements about central bank structure and independence are true?
The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize
The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed
Compared to the Federal Reserve, the European Central Bank is less transparent because
What is the theory of bureaucratic behavior and how can it be used to explain the behavior of the Federal Reserve?
The case for Federal Reserve independence does not include the idea that
The political business cycle refers to the phenomenon that just before elections, politicians enact ________ policies. After the elections, the bad effects of these policies (for example, ________ ) have to be counteracted with ________ policies.
The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures would impart
Critics of the current system of Fed independence contend that