This Final Exam Part 4 assesses understanding of international economics, focusing on exchange rates, capital flows, and monetary policy. It tests the ability to analyze economic relationships and policy impacts in a global context.
1929
1913
1909
1945
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Nine
Seven
Five
Twelve
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Regulating other banks
Making loans to banks
Issuing U.S. Treasury securities
Issuing currency
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High securities prices
Low unemployment
Price stability
A strong domestic currency
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That prices reflect the relative value of goods and services
That inflation not exceed three percent a year
Deflation
Prices to remain constant
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Have the maximum growth rate possible
Keep the growth rate averaging zero
Keep the economy close to its potential or sustainable rate of growth
Balance every recession with a boom
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Commercial bank reserves
Currency
Governments' accounts
Treasury certificates
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Printing currency can be profitable for a government so government officials may have a strong incentive to print too much
Having large amounts of currency can lead to lower rates of inflation
Central banks use the profits from issuing currency to finance their operations
The only way to distribute currency to banks is through the central bank
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+0.5%
-0.5%
+ 16.7%
+6.5%
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Analyzing financial and economic conditions
Setting the reserve requirement
Approving bank merger applications
Making discount loans
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Lender of last resort
Open market operations
The government's bank
Regulation of banking
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Instruments under the direct control of central bankers but one step removed from operational targets
Instruments that are not under the direct control of the central banks but lie between operational instruments and objectives
The quantity or non-price targets of monetary policy
The real goals of monetary policy
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Diversification purposes
Foreign exchange interventions
Safekeeping
Diversification and safekeeping
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Discounting
Balance sheet adjustment
Multiple deposit creation
Spreading
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M
R
MB
ER
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The quantity of M1
Interest rates
The quantity of M2
Controlling the size of the money multiplier
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Serves a four-year term that cannot be renewed
Is selected from the Board of Governors, appointed by the U.S. President
Serves the same four-year term as the U.S. President
Serves an eight-year term
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Reserves and M2
M1 and reserves
Currency in the hands of the public, reserves and M1
Currency in the hands of the public and reserves in the banking system
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Country A's inflation rate will have to match country B's
Country A's monetary policy must be conducted so the inflation rate in country A matches the inflation rate in country B
Country A's monetary policy will not be able to be used to address domestic issues
All of the answers given are correct
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Observable only to monetary policy officials
Tightly linked to monetary policy objectives
Controllable and rigid
Difficult to change
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Currency-to-deposit ratio
Discount rate
Target federal funds rate
Reserve requirement
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Discount window lending
Lending to nonbanks
Federal funds rate target
Deposit rate
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Changes in the rate have a small impact on the actual quantity of money
The money multiplier is not impacted by the required reserve rate
The time lag between changing the required reserve rate and changes in the money supply can be too long
Small changes in the required reserve rate can have too big of an impact on the money multiplier and the level of deposits
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The inflation rate increased to over 18 percent in 1983
Many banks failed that otherwise may not have
Interest rates rose very high
Inflation remained high for most of the 1980's
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An increase in liabilities with no change in assets
An increase in assets and a decrease in liabilities
A decrease in assets and an increase in liabilities
The same as that of an open market purchase
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Seven
Nine
Twelve
Fourteen
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Paid to member banks in the form of a dividend
Sent to the FDIC to shore up the depositor insurance fund
Returned to the U.S. Treasury
Used to build the Fed's portfolio of securities
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Very specific; this adds to the Fed's accountability
By design, quite vague, allowing the Fed to really set its own goals
Specific regarding inflation, but vague on all other goals
Specific on the growth rate for the economy, but vague on all other objectives
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Primary credit
Conditional credit
Seasonal credit
Secondary credit
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Government's accounts
Currency
Reserves
Gold
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A controlled domestic interest rate, a closed capital market and a flexible exchange rate
A controlled domestic interest rate, an open capital market and a flexible exchange rate
No control over the domestic interest rate, an open capital market and a flexible exchange rate
A controlled domestic interest rate, an open capital market and a fixed exchange rate
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Equal to the total amount of reserves and is an asset of the central bank
Not reserves but is a liability of the central bank
A part of reserves and an asset of commercial banks
Not reserves but is an asset of central banks
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Its policies overturned only by the president
Control of its own budget
The board members appointed for very short terms
The chairperson serve as a member of the President's cabinet
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It makes clear what specific goals the central bankers are pursuing
It provides leeway for central bankers to change their goals without communicating the change and disrupting financial markets
It provides central bankers the secrecy needed to perform their jobs effectively
It can make goal setting vague enough so that the central bankers can always claim success
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Exports more than it imports
Must have ample gold reserves
Cannot have a domestic monetary policy
Must be running large trade deficits
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Mexico limiting the number of U.S. dollars an American can bring into the country
Mexico limiting the number of U.S. dollars its citizens can purchase before leaving on their vacation to the U.S.
Mexico limiting the number of pesos its citizens can take out of the country
All of the answers given would be examples of capital outflow controls
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Controls on capital inflows
Controls on capital outflows
Controls on both capital inflows and outflows
Fixed exchange rates
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Raise the required reserve rate
Purchase U.S. Treasury securities
Sell U.S. Treasury securities
Raise the discount rate
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The target federal funds rate
The current inflation rate
The 30-year U.S. Treasury bond rate
The inflation gap
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Only an increase in liabilities
Only a decrease in assets
No net change in assets or liabilities, only a change in the composition of assets with securities decreasing and reserves increasing
No net change in assets or liabilities, only a change in the composition of assets with securities increasing and reserves decreasing
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R/ER
M/MB
C + D
D - C
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To finance government spending the Treasury has to order more currency from the central bank
Fiscal policymakers always have to borrow to increase spending
Fiscal policymakers cannot borrow unless the Federal Reserve prints more money
Increased government spending has to be financed with either higher taxes or increased government borrowing
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Only nationally chartered banks
All state chartered banks with assets exceeding $100 million
Nationally chartered banks and state chartered banks that decide to join
Nationally chartered banks and all state chartered banks
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Member banks from their home district
Board of Directors of the Reserve Bank from their home district
President of the United States
Chairman of the Federal Reserve System
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Set the required reserve rate
Set the discount rate
Decide on the target interest rate
Set the prime rate
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Providing loans during times of financial distress
Providing deposit insurance
Overseeing commercial banks and the financial system
Managing the payments system
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High stock prices
Low and stable inflation
High and stable real growth
A stable exchange rate
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They can efficiently pursue all of their goals simultaneously
There are tradeoffs that make pursuing all of their goals simultaneously impossible
The goal(s) they pursue will be determined by stock market behavior
They must keep their goals secret or else they cannot be attained
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