FIN402 SEU Fin402 Questions
LEO Assignment 3 FIN 402 Q1. The Federal Reserve entity that determines monetary policy strategy is the ( A. Board of Governors. ( B. Shadow Open Market Committee. C. Chairman of the Board of Governors. ©) D. Federal Open Market Committee.✅ Q2. Which of the following central banks has the greatest degree of independence? O A. Federal Reserve System O B. European Central Bank✅ O C. Bank of Japan D. Bank of England Q3. Banks subject to reserve requirements set by the Federal Reserve System include A. all banks whether or not they are members of the Federal Reserve System.✅ ) B. only banks with less than $500 million in assets. ) C. only state-chartered banks D. only nationally chartered banks. Q4. If the Federal Reserve wants to lower the monetary base and the money supply, it will ( A. lower the discount rate. ) B. increase bank reserves. C. sell government securities.✅ O D. lower reserve requirements. LEO Assignment 3 FIN 402 Q5. When the Federal Reserve was created, its most important role was intended to be ( A. a regulator of bank holding companies. B. a storage facility for the nation’s gold. C. the issuer of government debt. O D. a lender of last resort.✅ Q6. Under inflation targeting, a central bank must pursue policies that A. keep the inflation rate at a target value of zero. B. keep the inflation rate within a specific target range.✅ O C. keep the inflation rate at some specific target value. O D. lower the inflation rate, provided this can be done without raising the unemployment rate above a specified target value. Q7. Regulations making it obligatory for depository institutions to keep a certain fraction of their deposits in accounts with the Fed are © A. reserve requirements.✅ B. federal funds rate. C. open market operations. O D. Discount rate Q8. The Fed is an active participant in money markets mainly because of its responsibility to O A. assist the Securities and Exchange Commission in regulating the behavior of other money market participants. B. lower borrowing costs to encourage capital investment. C. increase the interest income of retirees holding money market instruments. D. control the money supply.✅ LEO Assignment 3 FIN 402 Q9. Money market instruments issued by the U.S. Treasury are called A. Treasury notes. © B. Treasury bills.✅ • C. Treasury bonds. D. Treasury strips. Q10. If the Fed wants to raise the federal funds interest rate, it will __ securities to __ the banking system • A. buy; remove reserves from ) B. sell; remove reserves from✅ O C. sell; add reserves to O D. buy; add reserves to ESSAY: Q11. Over the centuries, economies have been periodically subject to asset-price bubbles.The story of the 2007-2009 financial crisis indicates how costly these bubbles can be. What is asset-price bubbles? Should central banks respond to asset-price bubbles? Taking lessons from 2007-2009 financial crisis, discuss both pros and cons of central banks responses to assetprice bubbles.
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