ECO Chapter 11 Exam Study 2025 – Study Guide & Lecture Summary
Why did the Bank of England up until 1997 have a low degree of independence? - correct
answer ✔✔ Until 1997, the power to set interest rates was determined exclusively by Her
Majesty's Treasury.
In Canada, the Bank of Canada and the government jointly set the goal of monetary policy, a
target for inflation. Thus, when compared to the Fed, the Bank of Canada has: - correct answer
✔✔ less goal independence
Which of the following statements about central bank structure and independence is true? -
correct answer ✔✔ In recent years, there has been a remarkable trend toward increasing
independence.
While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy,
its critics contend that: - correct answer ✔✔ its independence is limited by the Ministry of
Finance's veto power over part of the Bank's budget
Which is more independent, the Federal Reserve or the European Central Bank? Why? - correct
answer ✔✔ The European Central Bank -
Its charter cannot be changed through legislation, making it more independent than the Federal
Reserve.
The European Central Bank (ECB) has complete control over monetary policy in eleven euro
countries and has a charter that cannot be changed by legislation. In comparison to the Federal
Reserve System
the ECB is: - correct answer ✔✔ more independent.
, The European System of Central Banks (ESCB) is similar to the Federal Reserve System in that: -
correct answer ✔✔ it is structured such that the central banks for each country have a similar
role to that of the Federal Reserve banks
A dilemma challenging the existing structure of the European Central Bank (ECB) has been
brought on by: - correct answer ✔✔ the possibility of expanding the membership in the
Eurosystem
The public interest view of central bank behavior suggests that the objective of a bureaucracy is
to maximize: - correct answer ✔✔ the public's welfare
The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize:
- correct answer ✔✔ its own welfare.
The theory of bureaucratic behavior suggests that the Federal Reserve
will: - correct answer ✔✔ *try to avoid a conflict with the president and Congress over
increases in interest rates.
*devise clever strategies in an effort to avoid blame for poor economic performance.
*try to gain regulatory power over more banks.
Advocates of Fed independence fear that subjecting the Fed to direct presidential or
congressional control would: - correct answer ✔✔ * impart an inflationary bias to monetary
policy.
* force monetary authorities to sacrifice the long-run objective of price stability.
1. The Fed's personnel are not directly affected by the outcome of the next
election; therefore, it has some level of independence: - correct answer ✔✔ 1. TRUE
Why did the Bank of England up until 1997 have a low degree of independence? - correct
answer ✔✔ Until 1997, the power to set interest rates was determined exclusively by Her
Majesty's Treasury.
In Canada, the Bank of Canada and the government jointly set the goal of monetary policy, a
target for inflation. Thus, when compared to the Fed, the Bank of Canada has: - correct answer
✔✔ less goal independence
Which of the following statements about central bank structure and independence is true? -
correct answer ✔✔ In recent years, there has been a remarkable trend toward increasing
independence.
While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy,
its critics contend that: - correct answer ✔✔ its independence is limited by the Ministry of
Finance's veto power over part of the Bank's budget
Which is more independent, the Federal Reserve or the European Central Bank? Why? - correct
answer ✔✔ The European Central Bank -
Its charter cannot be changed through legislation, making it more independent than the Federal
Reserve.
The European Central Bank (ECB) has complete control over monetary policy in eleven euro
countries and has a charter that cannot be changed by legislation. In comparison to the Federal
Reserve System
the ECB is: - correct answer ✔✔ more independent.
, The European System of Central Banks (ESCB) is similar to the Federal Reserve System in that: -
correct answer ✔✔ it is structured such that the central banks for each country have a similar
role to that of the Federal Reserve banks
A dilemma challenging the existing structure of the European Central Bank (ECB) has been
brought on by: - correct answer ✔✔ the possibility of expanding the membership in the
Eurosystem
The public interest view of central bank behavior suggests that the objective of a bureaucracy is
to maximize: - correct answer ✔✔ the public's welfare
The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize:
- correct answer ✔✔ its own welfare.
The theory of bureaucratic behavior suggests that the Federal Reserve
will: - correct answer ✔✔ *try to avoid a conflict with the president and Congress over
increases in interest rates.
*devise clever strategies in an effort to avoid blame for poor economic performance.
*try to gain regulatory power over more banks.
Advocates of Fed independence fear that subjecting the Fed to direct presidential or
congressional control would: - correct answer ✔✔ * impart an inflationary bias to monetary
policy.
* force monetary authorities to sacrifice the long-run objective of price stability.
1. The Fed's personnel are not directly affected by the outcome of the next
election; therefore, it has some level of independence: - correct answer ✔✔ 1. TRUE
