Question 1

The 12 Federal Reserve banks are involved in monetary policy in which of the following ways?

Accepted Answer

A)  Their directors establish the discount rate. 
B)  They decide which banks can obtain discount loans from the Federal Reserve Bank. 
C)  Their directors select one commercial banker from each bank's district to serve on the Federal Advisory Council. 
D)  all of the above. 
A)  Their directors establish the discount rate. 
B)  They decide which banks can obtain discount loans from the Federal Reserve Bank. 
C)  Their directors select one commercial banker from each bank's district to serve on the Federal Advisory Council. 
D)  all of the above. D

Question 2

Which Federal Reserve Bank president always has a vote in the Federal Open Market Committee?

Accepted Answer

A)  Philadelphia 
B)  New York 
C)  Boston 
D)  San Francisco 
A)  Philadelphia 
B)  New York 
C)  Boston 
D)  San Francisco B

Question 3

Critics of Fed independence argue

Accepted Answer

A)  that it is undemocratic to have monetary policy controlled by an elite group responsible to no one. 
B)  that an independent Fed conducts monetary policy with a consistent inflationary bias. 
C)  that the Fed, since it does not face a binding budget constraint, spends too much of its earnings. 
D)  only A and B of the above. 
A)  that it is undemocratic to have monetary policy controlled by an elite group responsible to no one. 
B)  that an independent Fed conducts monetary policy with a consistent inflationary bias. 
C)  that the Fed, since it does not face a binding budget constraint, spends too much of its earnings. 
D)  only A and B of the above. A

Question 4

The unusual structure of the Federal Reserve System is perhaps best explained by

Accepted Answer

A)  Americans' fear of centralized power. 
B)  the traditional American distrust of moneyed interests. 
C)  Americans' desire to remove control of the money supply from the U.S. Treasury. 
D)  all of the above. 
E)  only A and B of the above. 
A)  Americans' fear of centralized power. 
B)  the traditional American distrust of moneyed interests. 
C)  Americans' desire to remove control of the money supply from the U.S. Treasury. 
D)  all of the above. 
E)  only A and B of the above.

Question 5

The Washington,D.C.Fed bank,with over 30 percent of the system's assets,is the most important Federal Reserve Bank.

Accepted Answer

A) True 
 B)False

Question 6

The ________ of the Board of Governors is the spokesperson for the Fed.

Accepted Answer

A)  chairman 
B)  president 
C)  either of the above can be the spokesperson 
D)  neither of the above 
A)  chairman 
B)  president 
C)  either of the above can be the spokesperson 
D)  neither of the above

Question 7

Which of the following banks are required to be members of the Federal Reserve System?

Accepted Answer

A)  State-chartered banks 
B)  Insured banks 
C)  Banks having over $500 million in assets 
D)  None of the above 
A)  State-chartered banks 
B)  Insured banks 
C)  Banks having over $500 million in assets 
D)  None of the above

Question 8

Americans' fear of centralized power and their distrust of moneyed interests explain why the U.S.did not have a central bank until the

Accepted Answer

A)  17th century. 
B)  18th century. 
C)  19th century. 
D)  20th century. 
A)  17th century. 
B)  18th century. 
C)  19th century. 
D)  20th century.

Question 9

Which of the following is an element of the Federal Reserve System?

Accepted Answer

A)  The Federal Reserve banks 
B)  The Board of Governors 
C)  The FDIC 
D)  All of the above 
E)  Only A and B of the above 
A)  The Federal Reserve banks 
B)  The Board of Governors 
C)  The FDIC 
D)  All of the above 
E)  Only A and B of the above

Question 10

Which of the following is not an entity of the Federal Reserve System?

Accepted Answer

A)  Federal Reserve banks 
B)  The FDIC 
C)  The Board of Governors 
D)  The Federal Advisory Council 
E)  Member commercial banks 
A)  Federal Reserve banks 
B)  The FDIC 
C)  The Board of Governors 
D)  The Federal Advisory Council 
E)  Member commercial banks

Question 11

Each member of the seven-member Board is appointed by the president and confirmed by the Senate to serve 14-year terms.

Accepted Answer

A) True 
 B)False

Question 12

The Fed has goal independence but not instrument independence.

Accepted Answer

A) True 
 B)False

Question 13

The power within the Federal Reserve was effectively transferred to the Board of Governors by

Accepted Answer

A)  the banking legislation of the Great Depression. 
B)  Supreme Court decisions in the 1950s. 
C)  the Depository Institutions Deregulation and Monetary Control Act of 1980. 
D)  the Treasury-Federal Reserve Accord of 1951. 
A)  the banking legislation of the Great Depression. 
B)  Supreme Court decisions in the 1950s. 
C)  the Depository Institutions Deregulation and Monetary Control Act of 1980. 
D)  the Treasury-Federal Reserve Accord of 1951.

Question 14

The newest central bank,which began operations in January 1999,is the

Accepted Answer

A)  European Central Bank. 
B)  Bank of Argentina. 
C)  Bank of Korea. 
D)  Bank of New Zealand. 
A)  European Central Bank. 
B)  Bank of Argentina. 
C)  Bank of Korea. 
D)  Bank of New Zealand.

Question 15

The three largest Federal Reserve banks in terms of assets are those of New York,Chicago,and

Accepted Answer

A)  Atlanta. 
B)  Los Angeles. 
C)  Baltimore. 
D)  San Francisco. 
A)  Atlanta. 
B)  Los Angeles. 
C)  Baltimore. 
D)  San Francisco.

Question 16

The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures would impart

Accepted Answer

A)  an inflationary bias to monetary policy. 
B)  a deflationary bias to monetary policy. 
C)  a disinflationary bias to monetary policy. 
D)  a countercyclical bias to monetary policy. 
A)  an inflationary bias to monetary policy. 
B)  a deflationary bias to monetary policy. 
C)  a disinflationary bias to monetary policy. 
D)  a countercyclical bias to monetary policy.

Question 17

Bank panics in 1819,1837,1857,1873,1884,1893,and 1907 convinced many that

Accepted Answer

A)  the Federal Reserve needed greater control over the banking system. 
B)  the Federal Reserve needed greater authority to deal with problem banks. 
C)  a central bank was needed to prevent future financial panics. 
D)  both A and B of the above. 
A)  the Federal Reserve needed greater control over the banking system. 
B)  the Federal Reserve needed greater authority to deal with problem banks. 
C)  a central bank was needed to prevent future financial panics. 
D)  both A and B of the above.

Question 18

The case for Federal Reserve independence includes the idea that

Accepted Answer

A)  political pressure would impart an inflationary bias to monetary policy. 
B)  a politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level. 
C)  a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
D)  all of the above. 
A)  political pressure would impart an inflationary bias to monetary policy. 
B)  a politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level. 
C)  a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
D)  all of the above.

Question 19

The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

Accepted Answer

A)  the First Bank of the United States had failed to serve as a lender of last resort. 
B)  the Second Bank of the United States had failed to serve as a lender of last resort. 
C)  the Federal Reserve System had failed to serve as a lender of last resort. 
D)  a central bank was needed to prevent future panics. 
A)  the First Bank of the United States had failed to serve as a lender of last resort. 
B)  the Second Bank of the United States had failed to serve as a lender of last resort. 
C)  the Federal Reserve System had failed to serve as a lender of last resort. 
D)  a central bank was needed to prevent future panics.

Question 20

Rapid money supply growth and uncontrollable inflation were among the factors which motivated the creation of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Exam 9: Central Banks and the Federal Reserve System

The 12 Federal Reserve banks are involved in monetary policy in which of the following ways?

Which Federal Reserve Bank president always has a vote in the Federal Open Market Committee?

Critics of Fed independence argue

The unusual structure of the Federal Reserve System is perhaps best explained by

The Washington,D.C.Fed bank,with over 30 percent of the system's assets,is the most important Federal Reserve Bank.

The ________ of the Board of Governors is the spokesperson for the Fed.

Which of the following banks are required to be members of the Federal Reserve System?

Americans' fear of centralized power and their distrust of moneyed interests explain why the U.S.did not have a central bank until the

Which of the following is an element of the Federal Reserve System?

Which of the following is not an entity of the Federal Reserve System?

Each member of the seven-member Board is appointed by the president and confirmed by the Senate to serve 14-year terms.

The Fed has goal independence but not instrument independence.

The power within the Federal Reserve was effectively transferred to the Board of Governors by

The newest central bank,which began operations in January 1999,is the

The three largest Federal Reserve banks in terms of assets are those of New York,Chicago,and

The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures would impart

Bank panics in 1819,1837,1857,1873,1884,1893,and 1907 convinced many that

The case for Federal Reserve independence includes the idea that

The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

Rapid money supply growth and uncontrollable inflation were among the factors which motivated the creation of the Federal Reserve System.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

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