Central Bank and Nominal Interest Rate
If the Fed is following a flat monetary policy rule, it will
Answer
aggressively increase inflation if the interest rate exceeds the target interest rate.
aggressively increase interest rates if the inflation rate exceeds the target inflation rate.
only slightly increase inflation if the interest rate exceeds the target interest rate.
only slightly increase interest rates if the inflation rate exceeds the target inflation rate.
During the Christmas shopping season the demand for money increases significantly. If the Fed takes no actions to offset the increase in money demand, then nominal interest rates will ____.
Answer
increase.
decrease.
remain constant.
equal the real interest rates.
Which of the following would be expected to increase the U.S. demand for money?
Answer
Competition among brokers forces down the commission charge for selling bonds or stocks.
The economy enters a recession.
Political instability increases dramatically in developing nations.
On-line banking allows customers to transfer funds between checking and stock mutual funds 24 hours a day.
The two main responsibilities of the Federal Reserve System are to _____ and to ______.
Answer
apprehend counterfeiters; regulate the stock market
enable banks to make affordable mortgages; control the exchange rate of the U.S. dollar
insure bank deposits; print currency
conduct monetary policy; oversee financial markets
A banking panic is an episode in which:
Answer
depositors, spurred by news or rumors of possible bankruptcy of one bank, rush to withdraw deposits from the banking system.
commercial banks, fearing Federal Reserve sanctions, unwillingly participate in open-market operations.
commercial banks, concerned about high interest rates, rush to borrow at the Federal Reserve discount rate.
depositors, afraid of increasing interest rates, attempt to engage in discount-window
Answer
aggressively increase inflation if the interest rate exceeds the target interest rate.
aggressively increase interest rates if the inflation rate exceeds the target inflation rate.
only slightly increase inflation if the interest rate exceeds the target interest rate.
only slightly increase interest rates if the inflation rate exceeds the target inflation rate.
During the Christmas shopping season the demand for money increases significantly. If the Fed takes no actions to offset the increase in money demand, then nominal interest rates will ____.
Answer
increase.
decrease.
remain constant.
equal the real interest rates.
Which of the following would be expected to increase the U.S. demand for money?
Answer
Competition among brokers forces down the commission charge for selling bonds or stocks.
The economy enters a recession.
Political instability increases dramatically in developing nations.
On-line banking allows customers to transfer funds between checking and stock mutual funds 24 hours a day.
The two main responsibilities of the Federal Reserve System are to _____ and to ______.
Answer
apprehend counterfeiters; regulate the stock market
enable banks to make affordable mortgages; control the exchange rate of the U.S. dollar
insure bank deposits; print currency
conduct monetary policy; oversee financial markets
A banking panic is an episode in which:
Answer
depositors, spurred by news or rumors of possible bankruptcy of one bank, rush to withdraw deposits from the banking system.
commercial banks, fearing Federal Reserve sanctions, unwillingly participate in open-market operations.
commercial banks, concerned about high interest rates, rush to borrow at the Federal Reserve discount rate.
depositors, afraid of increasing interest rates, attempt to engage in discount-window