Multiple Choice Answers

Question 1
Which of the following is true concerning the consumer price index (CPI)?
Question 1 options:
It reports price changes in a representative “basket” of household purchases.
It includes both goods and services, but the “core rate” excludes food and energy prices.
An increase in the CPI indicates a rise in price inflation in the U.S. economy.
All of the above.

Question 2
When money is held primarily to preserve wealth, it is performing its function as a
Question 2 options:
standard of value.
measure of value.
store of value.
structure of value.

Question 3
According to the expectations theory, which yield curve configuration reflects investor expectations that there will be a fall in future interest rates relative to current interest rates?
Question 3 options:
Normal
Inverted
Humped
Flat

Question 4
Historically, an inverted yield curve for U.S. Treasury securities has often signaled
Question 4 options:
an economic expansion.
an economic recession.
a period of increased productivity.
a period of economic stability.
Question 5
If investor expectations are the dominant factor in causing the yield curve to become inverted,
Question 5 options:
interest rates are expected to decline over time.
interest rates are expected to increase over time.
interest rates are expected to remain the same over time.
interest rates are not expected to affect the shape of the yield curve.

Question 10
The total amount of loanable funds available to U.S. borrowers is influenced by changes in:
I. The rate of savings
II. The availability of bank credit
III. The velocity of circulation
Question 10 options:
I and II only
I and III only
II and III only
I, II, and III
Question 11
The Federal Reserve System includes:
I. Regional (district) banks
II. Branch banks of various regional banks
III. Check processing centers throughout the U.S.
Question 11 options:
I and II only
I and III only
II and III only
I, II, and III

Question 12
The goals of the Federal Reserve include:
I. Promoting a healthy level of U.S. economic employment and productivity
II. Managing the money supply so as to preclude high rates of price inflation
III. Insuring an adequate amount of government debt is issued to cover federal deficit spending
Question 12 options:
I and II only
I and III only
II and III only
I, II, and III

Question 13
Most members of the Federal Reserve Board of Governors
Question 13 options:
serve their full term of office.
leave before serving their full term of office.
are appointed for a second full term of office.
serve a lifetime appointment to office.
Question 14
Which of the following are voting members of the Federal Open Market Committee?
I. The chairman and vice-chairman of the Federal Reserve Board of Governors
II. The president of the New York Federal Reserve District Bank
III. The remaining eleven presidents of the district banks
Question 14 options:
I and II only
I and III only
II and III only
I, II, and III
Question 15
Why is the president of the New York Federal Reserve District Bank accorded permanent membership on the FOMC?
Question 15 options:
The position is purely symbolic, since the NY District Bank is located on Wall Street.
The NY District Bank is the FOMC’s agent in monetary policy transactions.
The president of the NY District Bank always sits on the U.S. President’s cabinet.
The SEC requires the NY District Bank president to attend all FOMC meetings.
Question 16
Members of the seven-member Board of Governors of the Federal Reserve System are appointed for _________, while the Chairman of the Board of Governors is appointed for __________.
Question 16 options:
a fourteen year term of office; a four year term of office with reappointment possible
an indefinite term of office; a one-time four year term of office
a fourteen year term of office; a one-time four year term of office
an indefinite term of office; a four year term of office with reappointment possible

Question 17
Which of the following financial institutions is required to conform to the reserve requirements mandated by the Federal Reserve System?
I. National banks
II. State banks
III. Credit unions
Question 17 options:
I and II only
I and III only
II and III only
I, II, and III
Question 18
Which of the following is true concerning meetings of the Federal Open Market Committee?
Question 18 options:
Meetings occur only as needed, but usually on a quarterly basis.Members are permitted to voice their opinions, but not to vote on issues.
Press releases of matters discussed in FOMC meetings are never made publicly available.
None of the above