Question 1

The European Central Bank has ensured independence by:

Accepted Answer

The ECB has explicitly forbidden the Governing Council from taking instructions from any government to ensure its independence. This is meant to ensure that the ECB makes decisions based solely on economic considerations and not political pressure. The other options, such as supporting political organizations or appointing members for life, do not necessarily guarantee independence and may even compromise it.

Question 2

Why did it take almost 150 years before the U.S.had a permanent central bank?

Accepted Answer

The answer of Why did it take almost 150 years...

Question 3

Based on the membership of the Eurosystem in 2014, the median country is likely to be:

Accepted Answer

The Eurosystem includes 19 countries and 6 of which have a population of less than 5 million. Therefore, the median country is likely to be fairly small.

Question 4

Why are so few state chartered banks members of the Federal Reserve System?

Accepted Answer

The answer of Why are so few state chartered banks...

Question 5

Why can't two Governors of the Fed come from the same district and does this limitation make sense today?

Accepted Answer

The answer of Why can't two Governors of the Fed...

Question 6

The method used by the ECB to measure inflation for meeting its objectives:

Accepted Answer

The ECB's inflation measurement method uses a harmonized index of consumer prices (HICP), which gives equal weight to each member country. This can result in a contractionary monetary policy being used in a country where inflation is already very low, potentially causing economic harm.

Question 7

The European Central Bank has ensured independence by appointing Executive Board members for:

Accepted Answer

The ECB has appointed its Executive Board members for eight-year non-renewable terms to ensure their independence.

Question 8

In what ways do the regional Federal Reserve Banks influence monetary policy?

Accepted Answer

The answer of In what ways do the regional Federal...

Question 9

As of 2014, the euro had become the currency for:

Accepted Answer

As of 2014, the euro was the official currency of 18 countries: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, and Slovenia.

Question 10

Who makes up the voting members of the Federal Reserve's Open Market Committee?

Accepted Answer

The answer of Who makes up the voting members of...

Question 11

Great Britain is:

Accepted Answer

Great Britain is a member of the European Union but it is not a member of the Euro system. The country still uses its own currency, the British Pound, instead of the Euro.

Question 12

In the meetings of the Governing Council of the European Central Bank, formal votes are:

Accepted Answer

The answer of In the meetings of the Governing Council...

Question 13

If it is the real rate of interest that savers and borrowers respond to, how does the Fed impact a real rate by targeting a nominal rate of interest?

Accepted Answer

The answer of If it is the real rate of...

Question 14

France, Germany, and Italy are:

Accepted Answer

France, Germany, and Italy are all members of the European Union and the Euro system.

Question 15

Why is it technically incorrect to say that the board of directors of the regional Fed banks set the discount rate that each bank charges?

Accepted Answer

The answer of Why is it technically incorrect to say...

Question 16

The Federal Reserve is the U.S.government's bank.Identify the functions the Fed performs in this role.

Accepted Answer

The answer of The Federal Reserve is the U.S.government's bank.Identify...

Question 17

The ECB's Governing Council has price stability as a primary objective.It has defined price stability as:

Accepted Answer

The ECB's Governing Council has defined price stability as an inflation rate below but close to 2%. This means that the ECB aims to keep inflation at around 2% over the medium term, which is generally considered to be the optimal level for the economy to grow and avoid deflation. Option A is incorrect as a zero inflation rate could lead to deflationary pressures, option B is wrong as an inflation rate less than 5% is too high to maintain price stability, and option D is incorrect as an inflation rate in the 3-5% range is generally considered too high and potentially damaging to long-term economic growth.

Question 18

The make-up of the Governing Council of the European Central Bank and the methods used to calculate price stability for the monetary system can potentially result in:

Accepted Answer

All of the results listed are possible. The Governing Council of the European Central Bank is composed of members from each member state, regardless of the size of the country. This can result in small countries having undue influence on the decisions of the Council. Additionally, the methods used to calculate price stability may not be appropriate for all countries within the monetary system, leading to a policy that is well suited for some countries but ill-suited for others. The Council may also prioritize policies that benefit the median country rather than a specific country's needs. Therefore, all of the results listed in the options are possible.

Question 19

What are the three branches that make up the Federal Reserve System?

Accepted Answer

The answer of What are the three branches that make...

Question 20

How are the locations of the twelve regional Federal Reserve Banks and the corresponding districts explained?

Accepted Answer

The answer of How are the locations of the twelve...

Quiz 16: The Structure of Central Banks: The Federal Reserve and the European Central Bank