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36-61
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
open-market operations
D.
the federal funds rate
123.
Which of the following monetary policy tools was introduced in 2008?
124.
If the Fed wants to discourage commercial bank lending, it will
125.
Interest paid on excess reserves held at the Fed
36-62
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
incentivizes financial institutions to hold more reserves and reduce risky lending.
C.
is determined by the federal funds rate.
D.
totaled over $1 trillion in 2012.
126.
Beginning in 2008, the Fed was allowed to
127.
Big Bucks Bank currently holds $20 million in excess reserves. If the Fed increases the
rate of interest it pays on excess reserves held at the Fed,
we would expect Big Bucks Bank
to
36-63
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
To pi c: Tools of Monetary Policy
128.
Which of the following actions by the Fed most likely increase commercial bank
lending?
129.
The interest rate that banks charge one another on overnight loans is called the
130.
The federal funds rate is the interest rate that
charge(s)
.
36-64
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i c u l t y : 02 Medium
Learning Objective: 36-04 Describe the federal funds rate and how the Fed directly influences
it.
Test Bank: I
To pi c: Targeting the Federal Funds Rate
132.
The Fed directly sets
133.
A federal funds rate reduction that is caused by monetary policy will
36-65
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
decrease the size of the monetary multiplier.
C.
increase the Fed's discount rate.
D.
decrease the prime interest rate.
134.
Prior to the financial crisis, to reduce the federal funds rate, the Fed could
135.
Generally, the prime interest rate
136.
Reserves borrowed at the federal funds rate are usually repaid
137.
The Fed's initial step in pursuing restrictive monetary policy using the federal funds
rate is to
138.
To increase the federal funds rate, the Fed historically has
36-67
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i c u l t y : 02 Medium
Learning Objective: 36-04 Describe the federal funds rate and how the Fed directly influences
it.
Test Bank: I
To pi c: Targeting the Federal Funds Rate
139.
In recent years, the Fed has communicated changes in its monetary policy by
announcing changes in its policy targets for the
140.
The prime interest rate
141.
The federal funds rate is
36-68
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
higher than the prime interest rate but lower than the discount rate.
D.
lower than the prime interest rate but higher than the discount rate.
142.
Before the financial crisis, if the Fed wanted to lower the federal funds rate, it would
143.
Other things equal, which of the following would increase the federal funds rate?
144.
The benchmark interest rate that banks use as a reference point for a variety of
consumer and business loans is the
145.
The prime interest rate usually
146.
Since the financial crisis of 2007–2009, borrowing at the federal funds rate
36-70
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 36-04 Describe the federal funds rate and how the Fed directly influences
it.
Test Bank: I
To pi c: Targeting the Federal Funds Rate
147.
Which of the following statements is most accurate about the Fed’s use of the federal
funds rate target since the financial crisis of 2007–2009?
148.
After the financial crisis of 2007–2009, why did the Federal Reserve effectively lose
its ability to increase the money supply by manipulating the
federal funds rate target?
36-71
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written consent of McGraw-Hill Education.
To pi c: Targeting the Federal Funds Rate
149.
Prior to the financial crisis of 2007–2009, the Fed would typically initiate an
expansionary monetary policy by
150.
Which statement best reflects the Fed’s approach to expansionary monetary policy
before the mortgage debt crisis?
151.
The prime interest rate
36-72
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
usually is at the same level as the federal funds rate.
C.
is a benchmark interest rate set directly by the Fed.
D.
is influenced by Fed policies that change the money supply.
152.
The increase in excess reserves that occurred as a result of the mortgage debt crisis
153.
The Fed’s inability to stimulate the economy by reducing interest rates is known as the
36-73
154.
Why wouldn’t the Fed want to drive nominal interest rates below zero in response to a
financial crisis and recession?
155.
Which of the following would most likely result from the Fed imposing negative
nominal interest rates in response to a financial crisis and
recession?
156.
The Fed’s response to the zero lower bound problem was
36-74
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written consent of McGraw-Hill Education.
A. to raise the lower bound.
B.
quantitative easing.
C.
to lower the reserve ratio.
D.
restrictive monetary policy.
157.
Which of the following statements about quantitative easing is most accurate?
158.
Which of the following is a difference between "quantitative easing" and ordinary
open-market operations?
159.
In terms of the mechanics of quantitative easing,
160.
Prior to the mortgage debt crisis, the most frequently employed restrictive monetary
policy tool was
161.
When the Fed sells bonds to the bank and the public, the expected result is that
162.
Restrictive monetary policy since the mortgage debt crisis
163.
What does it mean when economists say that the Fed has attempted to "normalize"
monetary policy after the Great Recession?
36-77
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written consent of McGraw-Hill Education.
B.
The Fed has tried to use monetary policy to raise excess reserves back up to normal
prerecession levels.
C.
The Fed has tried to make all of the monetary policy actions used during the financial
crisis a normal part of the monetary policy tool kit.
D.
The Fed has tried to use monetary policy to bring interest rates back to the historically
normal range of 3 percent or higher.
164.
The Fed’s normalization plan for monetary policy included
165.
The Fed’s attempt to normalize monetary policy by increasing the interest on excess
reserves rate
36-78
it.
166.
Which of the following statements is most accurate about the Fed’s attempt to normalize
monetary policy after the Great Recession?
167.
According to the Taylor rule,
168.
If the Fed were to set policy according to the Taylor rule, then if real GDP falls by 2
percent below potential GDP, the Fed should
36-79
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written consent of McGraw-Hill Education.
A. raise the real federal funds rate by 1 percentage point.
B.
reduce the real federal funds rate by 1 percentage point.
C.
raise the inflation rate by 1 percentage point.
D.
change the real federal funds rate until inflation hits the target rate of 4 percent.
169.
According to the Taylor rule, when real GDP is at its potential and inflation is at its
target rate of 2 percent, the Fed should
170.
According to the Taylor rule,
36-80
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written consent of McGraw-Hill Education.
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 36-04 Describe the federal funds rate and how the Fed directly influences
it.
Test Bank: I
To pi c: Targeting the Federal Funds Rate
171.
According to the Taylor rule, if real GDP is 4 percent below potential GDP, the Fed
should
172.
According to the Taylor rule, if inflation has risen by 6 percentage points above its
target of 2 percent, the Fed should
173.
Which of the following best describes the cause-effect chain of an expansionary
monetary policy?
