Chapter 16 Practice Quiz1. The mandate for the monetary policy goals that has been given to the Federal Reserve System is an example of a ____________ mandate.a. primaryb. dualc. secondaryd. hierarchical2. Which of the following is an advantage of the Fed’s “just do it” approach to monetary policy?a. There is low transparency of policy.b. There is low accountability for central bankers.c. The central bank uses many sources of information rather than relying on one variable.d. There is an immediate signal if the target has been achieved.3. Fluctuations in the demand for reserves cause the Fed to lose control over nonborrowed reserves if the Fed targetsA. a monetary aggregate.B. the monetary base.C. an interest rate.D. nominal GDP.4. Which of the following is NOT one of the criteria for choosing a policy instrument?A. MeasurabilityB. ControllabilityC. FlexibilityD. Predictability5. If the desired intermediate target is an interest rate, the preferred policy instrument would beA. the federal funds rate.B. the monetary base.C. nonborrowed reserves.D. borrowed reserves.6. __________________ bubble is driven entirely by unrealistic optimistic expectations.A. An irrational exuberanceB. A credit-drivenC. A stockD. A debt-driven7. Since the early 1990s, the Fed has conducted monetary policy by setting a target for theA. level of borrowed reserves.B. monetary base.C. federal funds rate.D. exchange rate.8. The Taylor RuleA. is used by Congress to determine budget allocations to government agencies.B. explains all of the movement of the federal funds rate.C. is a useful guide to monetary policy.D. is used to set the target for the discount rate.9. If the central bank targets nonborrowed reserves, it is likely to lose control over the interest rate becauseA. of fluctuations in the demand for reserves.B. of fluctuations in the consumption function.C. bond values will tend to remain stable.D. of fluctuations in the business cycle.10. Which of the following is an advantage of inflation targeting?A. There is an immediate signal on the achievement of the target.B. There is potential for increased output fluctuations.C. Inflation targeting lacks transparency.D. There is increased accountability of the central bank.Answers to practice quiz for chapter 16.1. B2. C3. C4. C5. A6. A7. C8. C9. A 10.
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