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| 1 | |
The ability to print money means the central bank can control: |
| | A) | The availability of money and credit in a country's economy. |
| | B) | Tax revenue. |
| | C) | The unemployment rate. |
| | D) | Government expenditures. |
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| 2 | |
Which of the following statements are true? |
| | A) | Printing money can be a profitable venture for a government. |
| | B) | Printing money, while necessary, is a losing venture for a government. |
| | C) | Too much money printed usually leads to lower prices. |
| | D) | In the modern economy the amount of money printed has no effect on prices. |
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| 3 | |
In its role as the bankers' bank, a central bank performs each of the following except: |
| | A) | Providing loans during times of financial distress. |
| | B) | Providing deposit insurance. |
| | C) | Overseeing commercial banks and the financial system. |
| | D) | Managing the payments system. |
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| 4 | |
The specific goals of central banks include all of the following except: |
| | A) | High stock prices. |
| | B) | Low and stable inflation. |
| | C) | High and stable real growth. |
| | D) | A stable exchange rate. |
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| 5 | |
If prices are not stable: |
| | A) | Money becomes less useful as a store of value. |
| | B) | Money performs better as a unit of account. |
| | C) | It may be an inconvenience, but resources are still allocated efficiently. |
| | D) | Prices become highly useful for conveying information. |
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| 6 | |
The correlation between high rates of inflation and economic growth is: |
| | A) | Direct; one brings about the other. |
| | B) | Inverse; high inflation usually means low economic growth. |
| | C) | There is no correlation between these measures. |
| | D) | Direct at low rates of economic growth and inverse at high rates. |
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| 7 | |
Most economists agree that the target rate of inflation for the central banks should be: |
| | A) | Between 7 and 9 percent. |
| | B) | Less than zero. |
| | C) | Not zero for fears of deflation. |
| | D) | Something over 3 but less than 6 percent. |
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| 8 | |
In terms of economic growth, the central bank would like to: |
| | A) | Have the maximum growth rate possible. |
| | B) | Keep the growth rate averaging zero. |
| | C) | Keep the economy close to its potential or sustainable rate of growth. |
| | D) | Balance every recession with a boom. |
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| 9 | |
Exchange-rate stability is likely to be a more important goal for the central banks of: |
| | A) | Emerging market economies than the central bank of the U.S. |
| | B) | The U.S. and Japan than most small developing countries. |
| | C) | Countries where exports and imports make up a small total of all economic activity. |
| | D) | Europe. |
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| 10 | |
Interest rate volatility is a problem because: |
| | A) | Expenditure in the economy tends to vary inversely with the interest rate. |
| | B) | It decreases risk. |
| | C) | It can impact productivity in a positive way. |
| | D) | Financial decisions become less difficult when interest rates are more volatile. |
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| 11 | |
To be independent, a central bank must have: |
| | A) | Its policies overturned only by the president. |
| | B) | Control of its own budget. |
| | C) | The board members appointed for very short terms. |
| | D) | The chairperson serve as a member of the President's cabinet. |
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| 12 | |
The means for assuring accountability and transparency: |
| | A) | Are different across the central banks of most countries. |
| | B) | Are the same for all successful central banks. |
| | C) | Involve setting specific numerical targets so there is no confusion as to what the goal is. |
| | D) | Are opposite to each other; increasing one means decreasing the other. |
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| 13 | |
The monetary policy framework is: |
| | A) | The Law that created the Federal Reserve System. |
| | B) | The idea that central banks should be interconnected across countries. |
| | C) | The concept that central bankers should be independent, accountable, and good communicators. |
| | D) | A growing belief that there should be one central bank headquartered at the World Bank. |
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| 14 | |
Whenever central bankers face more than one goal, the policy framework requires: |
| | A) | The central bank to always focus on inflation first. |
| | B) | Central bankers to focus on all goals, no matter what. |
| | C) | Economic growth to be the top priority. |
| | D) | Central bankers to make their priorities clear. |
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| 15 | |
For fiscal policymakers, one of the results of an independent central bank is: |
| | A) | To finance government spending the Treasury has to order more currency from the central bank. |
| | B) | Fiscal policymakers always have to borrow to increase spending. |
| | C) | Fiscal policymakers cannot borrow unless the Federal Reserve prints more money. |
| | D) | Increased government spending has to be financed with either higher taxes or increased government borrowing. |
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