Question 1

Each Federal Reserve bank is a corporation owned by the member banks in its district.

Accepted Answer

A) True 
 B)False  True

Question 2

A par bank is one that issues stock (equity shares) with a stated value printed on the face of each share of stock.

Accepted Answer

A) True 
 B)False  False

Question 3

Benefits to belonging to the Fed include:

Accepted Answer

A)  Dividends 
B)  Prestige 
C)  Borrowing capability 
D)  All of the above 
A)  Dividends 
B)  Prestige 
C)  Borrowing capability 
D)  All of the above D

Question 4

Dual banking systems are ideal because of the checks and balances that exist between the state and federal regulations.

Accepted Answer

A) True 
 B)False

Question 5

An increase in cash drain will cause a(n) ____ in the deposit multiplier and a(n) ____ in the money supply.

Accepted Answer

A)  Decrease, increase 
B)  Decrease, decrease 
C)  Decrease, no change 
D)  Increase, decrease 
E)  Increase, increase 
A)  Decrease, increase 
B)  Decrease, decrease 
C)  Decrease, no change 
D)  Increase, decrease 
E)  Increase, increase

Question 6

According to your text, the functions of central banks usually include:

Accepted Answer

A)  Control of the money supply 
B)  Stabilization of the money and capital markets 
C)  Direct lender to households 
D)  Maintaining and improving a nation's payment mechanism 
E)  A, B and C only are normal or usual central bank functions
F) A, B and D are all normal or usual central bank functions 
A)  Control of the money supply 
B)  Stabilization of the money and capital markets 
C)  Direct lender to households 
D)  Maintaining and improving a nation's payment mechanism 
E)  A, B and C only are normal or usual central bank functions
F) A, B and D are all normal or usual central bank functions

Question 7

Which of the following can the central bank affect?

Accepted Answer

A)  The cost of credit 
B)  The volume of growth of the money supply 
C)  The wealth of investors 
D)  All of the above 
E)  None of the above 
A)  The cost of credit 
B)  The volume of growth of the money supply 
C)  The wealth of investors 
D)  All of the above 
E)  None of the above

Question 8

The president of the Federal Reserve Bank of Philadelphia is a permanent voting member of the FOMC.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements regarding the Federal Reserve is/are true?

Accepted Answer

A)  The Federal Reserve influences the money supply creation process 
B)  The Fed, along with the public and the U.S. Treasury is a principal determinant of the size of the monetary base 
C)  It may take action to keep the monetary base stable, increase or decrease it 
D)  It can change required reserve ratios to affect the magnitude of the money multiplier 
E)  All of the above 
A)  The Federal Reserve influences the money supply creation process 
B)  The Fed, along with the public and the U.S. Treasury is a principal determinant of the size of the monetary base 
C)  It may take action to keep the monetary base stable, increase or decrease it 
D)  It can change required reserve ratios to affect the magnitude of the money multiplier 
E)  All of the above

Question 10

Recent research studies have found a significant positive correlation between the inflation rate experienced by leading industrial countries and the degree of independence from the political process enjoyed by their central banks.

Accepted Answer

A) True 
 B)False

Question 11

High-powered funds as a term that is often used for monetary base.

Accepted Answer

A) True 
 B)False

Question 12

The key administrative body of the Fed is the:

Accepted Answer

A)  Board of Governors 
B)  Federal Open Market Committee 
C)  Manager of the Open Market Account 
D)  President of the Federal Reserve banks 
E)  All of the above have roughly equal powers 
A)  Board of Governors 
B)  Federal Open Market Committee 
C)  Manager of the Open Market Account 
D)  President of the Federal Reserve banks 
E)  All of the above have roughly equal powers

Question 13

Suppose that legal reserve requirements imposed on all public deposits held by depository institutions increase from 10 to 15 percent. What change occurs in the transactions deposit multiplier? How would this change affect the maximum volume of new deposits and loans the entire banking system could create? Would there be any impact on the money multiplier? Under what circumstances?

Accepted Answer

The transactions deposit multiplier chan

Question 14

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A)  Clearing and collection of checks 
B)  Management of the national debt 
C)  Issuing coin and currency 
D)  Conducting monetary policy 
E)  All of the above are functions of the Federal Reserve System 
A)  Clearing and collection of checks 
B)  Management of the national debt 
C)  Issuing coin and currency 
D)  Conducting monetary policy 
E)  All of the above are functions of the Federal Reserve System

Question 15

If the monetary base is $130 billion while the nation's money supply is $450 billion, what is the size of the money multiplier (rounded to the nearest one tenth)?

Accepted Answer

A)  3.2 
B)  2.5 
C)  3.5 
D)  0.3 
E)  None of the above 
A)  3.2 
B)  2.5 
C)  3.5 
D)  0.3 
E)  None of the above

Question 16

The National Banking Act authorized the:

Accepted Answer

A)  Establishment of federally licensed banks 
B)  Office of the Comptroller of the Currency 
C)  Taxation of bank notes issued by state chartered banks 
D)  Creation of a dual banking system 
E)  All of the above 
A)  Establishment of federally licensed banks 
B)  Office of the Comptroller of the Currency 
C)  Taxation of bank notes issued by state chartered banks 
D)  Creation of a dual banking system 
E)  All of the above

Question 17

Money may be used to store purchasing power; defined this way, however, we must exclude savings accounts from the money supply definition.

Accepted Answer

A) True 
 B)False

Question 18

Recent research studies have often found a significant negative correlation between the inflation rate experienced by leading industrial countries and the:

Accepted Answer

A)  Balance of payments positions of those same countries 
B)  Size of the government's budget deficits 
C)  Degree of independence of their central banks from the political process 
D)  Particular monetary policies followed by their central banks 
E)  None of the above 
A)  Balance of payments positions of those same countries 
B)  Size of the government's budget deficits 
C)  Degree of independence of their central banks from the political process 
D)  Particular monetary policies followed by their central banks 
E)  None of the above

Question 19

Suppose the reserve requirement on transaction deposits is set by the Federal Reserve System at 15 percent and the banking system presently holds $25 million in excess reserves. Assuming all payments are made in the economy by drafts (checks) against transaction deposits, there are no leakages of funds into thrift deposits or additional excess reserves, all funds received are immediately loaned out by depository institutions as soon as they are received, what is the maximum volume of new deposits and loans that can be created by the banking system (rounded to the nearest million dollars)?

Accepted Answer

A)  $4 million 
B)  $7 million 
C)  $250 million 
D)  $167 million 
E)  $135 million
F) None of the above 
A)  $4 million 
B)  $7 million 
C)  $250 million 
D)  $167 million 
E)  $135 million
F) None of the above

Question 20

Recent research suggests that economies generally perform better (at least in terms of price stability) in those nations where central banks enjoy greater independence from government.

Accepted Answer

A) True 
 B)False

Exam 12: Exploring Central Banks and Their Impact on the Economy and Financial System

Each Federal Reserve bank is a corporation owned by the member banks in its district.

A par bank is one that issues stock (equity shares) with a stated value printed on the face of each share of stock.

Benefits to belonging to the Fed include:

Dual banking systems are ideal because of the checks and balances that exist between the state and federal regulations.

An increase in cash drain will cause a(n) ____ in the deposit multiplier and a(n) ____ in the money supply.

According to your text, the functions of central banks usually include:

Which of the following can the central bank affect?

The president of the Federal Reserve Bank of Philadelphia is a permanent voting member of the FOMC.

Which of the following statements regarding the Federal Reserve is/are true?

Recent research studies have found a significant positive correlation between the inflation rate experienced by leading industrial countries and the degree of independence from the political process enjoyed by their central banks.

High-powered funds as a term that is often used for monetary base.

The key administrative body of the Fed is the:

Which of the following is not a function of the Federal Reserve System?

If the monetary base is $130 billion while the nation's money supply is $450 billion, what is the size of the money multiplier (rounded to the nearest one tenth)?

The National Banking Act authorized the:

Money may be used to store purchasing power; defined this way, however, we must exclude savings accounts from the money supply definition.

Recent research studies have often found a significant negative correlation between the inflation rate experienced by leading industrial countries and the:

Recent research suggests that economies generally perform better (at least in terms of price stability) in those nations where central banks enjoy greater independence from government.

Understanding the Financial System and Its Impact on the Economy and Markets

Financial Systems, Monetary Units, and the Role of Money in the Economy

Financial Indices, Market Information, and Economic Data

The Financial Crisis and Its Impact on the Mortgage Market and Economy

Understanding Interest Rates, Savings, and the Wealth Effect

Financial Concepts and Interest Rates

Effects of Inflation and Yield Curves on Stock Prices and Investments

Understanding Risk and Market Factors in Financial Securities

Exploring Financial Markets and Hedging Strategies

Factors Affecting the Volume of CDs

Exploring the Reserve Accounting System, Money Markets, and Financial Instruments

Central Banking and Monetary Policy: Exploring Tools and Strategies

Banking and Financial Services: Regulations, Operations, and Trends

Comparative Analysis of Financial Institutions and Their Operations

Exploring Various Aspects of Pension Funds, Finance Companies, and Insurance Industry

The Impact of Deregulation and Regulation on Financial Institutions and Banking Industry in the United States

Treasury Auctions, Public Debt, and Government Borrowing: Exploring the Us Treasury System

Corporate Bond Pricing, Market Development, and Financing Strategies

The Truth About Regulation Fd and Stock Holdings: Debunking Common Myths in the Financial Market

Flexible Savings Account Options

Mortgage Market and Mortgage Instruments

International Financial Transactions and Balance of Payments

International Banking and Financial Regulations

Exploring the Complexities of Financial Services and Regulation

Filters

An increase in cash drain will cause a(n) in the deposit multiplier and a(n) in the money supply.