Econ

Chapter 18 Conduct of Monetary Policy: Goals and Targets

T

1)

Multiple Choice

The objectives of the Federal Reserve in its conduct of monetary policy include (a) economic growth. (b) price stability. (c) high employment. (d) all of the above. Answer: D Question Status: Previous Edition

2)

The goals of monetary policy include (a) output stability. (b) price stability. (c) stability of the financial markets. (d) all of the above. (e) both (b) and (c) of the above. Answer: E Question Status: New

3)

The goals of monetary policy include (a) output stability. (b) stability in the foreign exchange markets. (c) maintenance of the gold standard. (d) all of the above. (e) both (a) and (b) of the above. Answer: B Question Status: New

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Frederic S. Mishkin • Economics of Money, Banking, and Financial Markets, Seventh Edition

4)

Even if the Fed could completely control the money supply, monetary policy would have critics because (a) the Fed is asked to achieve many goals, some of which are incompatible with others. (b) the Fed’s goals do not include high employment, making labor unions a critic of the Fed. (c) the Fed’s primary goal is exchange rate stability, causing it to ignore domestic economic conditions. (d) it is required to keep Treasury security prices high. (e) all of the above. Answer: A Question Status: Study Guide

5)

High unemployment is undesirable because it (a) results in a loss of output. (b) always increases inflation. (c) always increases interest rates. (d) reduces the federal budget deficit. (e) reduces idle resources. Answer: A Question Status: New

6)

When workers voluntarily leave work while they look for better jobs, the resulting unemployment is called (a) structural unemployment. (b) frictional unemployment. (c) cyclical unemployment. (d) underemployment. Answer: B Question Status: Previous Edition

7)

Unemployment resulting from a mismatch of workers’ skills and job requirements is called (a)...