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(ECON333)PracticeFinalEaxmAK.pdf
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Final Exam
Economics 333
Money and Banking
Saturday, December 13, 2003

1.
The central bank purchases foreign currency in the foreign currency market. To conduct a sterilized intervention, the central bank must


a.
Increase discount window lending.


b.
Cut its interest rate target.


c.
Sell government securities to domestic banks


d.
Reduce domestic reserve requirements.






_________C_______

2.
A central bank has an operating target for the interbank interest rate. As a mater of policy the central bank decides to temporarily cut its interbank interest rate targets. This will


a.
Reduce the level of non-borrowed reserves and depreciate the exchange rate.


b.
Reduce the level of non-borrowed reserves and appreciate the exchange rate.


c.
Increase the level of non-borrowed reserves and depreciate the exchange rate.


d.
Increase the level of non-borrowed reserves and appreciate the exchange rate.






_________C_______


3.
The central bank has an operating target that maintains a fixed level of non-borrowed reserves and sets the discount window rate to fix the level of total reserves. A boom in the economy increases the need for liquidity to conduct transactions. This will lead to an:


a.
An increase in interest rates in the money market and an increase in the discount window rate.


b.
An increase in the interest rates in the money market but a decrease in the discount window rate.


c.
A decrease in the interest rate in the money market but an increase in the discount window rate.


d.
A decrease in the interest rate in the money market and a decrease in the discount window rate.






_______A_________

4.
Hong Kong has a fixed exchange rate with the US dollar and Korea maintains a domestic interest rate target. A cut in the Fed Funds rate will


a.
Depreciate the Korean Won relative to the US dollar and increase Hong Kongs money supply.


b.
Depreciate the Korean Won relative to the US dollar and reduce Hong Kongs money supply.


c.
Appreciate the Korean Won relative to the US dollar and increase Hong Kongs money supply.


d.
Appreciate the Korean Won relative to the US Dollar and reduce Hong Kongs money supply.






__________C______

5.
In the United States, we observe an increase in expected inflation. Using the bond market perspective, we should observe


a.
An increase in the price of US dollar bonds and an ambiguous effect on quantity of US dollar bonds.


b.
A decrease in the price of US dollar bonds and an ambiguous effect on the quantity of US dollar bonds.


c.
An ambiguous effect on the price of US dollar bonds and an increase in the quantity of US dollar bonds.


d.
An ambiguous effect on the price of US dollar bonds and a decrease in the quantity of US dollar bonds.






___________B_____