Question 1

Suppose that oil prices hit an all-time high of $200 a barrel, driving U.S. inflation up to 7% per year. At the same time, weak U.S. growth and increasing foreign competition has generated unacceptably high levels of unemployment in the United States. You are the Chair of the Federal Reserve. What do you suggest?

Accepted Answer

The answer of Suppose that oil prices hit an all-time...

Question 2

Federal Reserve Board members are appointed by the U.S. President and confirmed by the Senate for a non-renewable 14-year term.

Accepted Answer

A) True 
 B)False

Question 3

Currently the Fed sets monetary policy by targeting

Accepted Answer

A)  the fed funds rate. 
B)  the prime rate. 
C)  the level of non-borrowed reserves. 
D)  the level of borrowed reserves. 
E)  the stock market.

Question 4

The Check 21 Act effective in October 2004 does which of the following?

Accepted Answer

A)  Allows bank customers to better take advantage of bank float 
B)  Requires banks to immediately clear all customer deposits 
C)  Prohibits the Fed from being involved in check clearing to prevent unfair competition with private check clearing agencies 
D)  Authorizes the use of an electronic image to facilitate paperless check clearing 
E)  Eliminates all fees on checking

Question 5

If the FOMC wished to generate faster economic growth, they could issue a policy directive to the Federal Reserve Board Trading desk to purchase U.S. government securities.

Accepted Answer

A) True 
 B)False

Question 6

The fed funds rate is the rate that

Accepted Answer

A)  banks charge for loans to corporate customers. 
B)  banks charge to lend foreign exchange to customers. 
C)  the Federal Reserve charges on emergency loans to commercial banks. 
D)  banks charge each other on loans of excess reserves. 
E)  banks charge securities dealers to finance their inventory.

Question 7

Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?

Accepted Answer

The answer of Why did the Fed switch from increasing...

Question 8

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress?

Accepted Answer

The answer of How do Federal Reserve Banks generate income?...

Question 9

Is there a trade-off between controlling domestic inflation and maintaining a sustainable pattern of international trade?

Accepted Answer

The answer of Is there a trade-off between controlling domestic...

Question 10

Nationally chartered banks are required to become members of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 11

Why do changes in reserve requirements have less predictable effects on the money supply in comparison to changes in open market operations?

Accepted Answer

The answer of Why do changes in reserve requirements have...

Question 12

What does the 2004 Check 21 law allow? Why was this law passed? Does it benefit the customer or banks? Explain.

Accepted Answer

The answer of What does the 2004 Check 21 law...

Question 13

The monetary base is the amount of coin and currency in circulation plus reserves.

Accepted Answer

A) True 
 B)False

Question 14

The primary policy tool used by the Fed to meet its monetary policy goals is:

Accepted Answer

A)  changing the discount rate. 
B)  changing reserve requirements. 
C)  devaluing the currency. 
D)  changing bank regulations. 
E)  open market operations.

Question 15

What supervisory and regulatory authority does the Fed have under current law?

Accepted Answer

The answer of What supervisory and regulatory authority does the...

Question 16

The discount rate is the rate that

Accepted Answer

A)  banks charge for loans to corporate customers. 
B)  banks charge to lend foreign exchange to customers. 
C)  banks charge each other on loans of excess reserves. 
D)  banks charge securities dealers to finance their inventory. 
E)  the Federal Reserve charges on loans to commercial banks.

Question 17

Four seats on the FOMC are allocated to Federal Reserve Bank presidents on an annual rotating basis.

Accepted Answer

A) True 
 B)False

Question 18

How have recent changes in Discount Window credit programs affected the use of this tool for monetary policy?

Accepted Answer

The answer of How have recent changes in Discount Window...

Question 19

The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds.

Accepted Answer

A)  Fedwire 
B)  ACH 
C)  CHIPS 
D)  NASDAQ 
E)  SWIFT

Question 20

Explain how the deposit multiplier works.

Accepted Answer

The answer of Explain how the deposit multiplier works....

Exam 4: The Federal Reserve System, Monetary Policy, and Interest Rates

Federal Reserve Board members are appointed by the U.S. President and confirmed by the Senate for a non-renewable 14-year term.

Currently the Fed sets monetary policy by targeting

The Check 21 Act effective in October 2004 does which of the following?

If the FOMC wished to generate faster economic growth, they could issue a policy directive to the Federal Reserve Board Trading desk to purchase U.S. government securities.

The fed funds rate is the rate that

Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress?

Is there a trade-off between controlling domestic inflation and maintaining a sustainable pattern of international trade?

Nationally chartered banks are required to become members of the Federal Reserve System.

Why do changes in reserve requirements have less predictable effects on the money supply in comparison to changes in open market operations?

What does the 2004 Check 21 law allow? Why was this law passed? Does it benefit the customer or banks? Explain.

The monetary base is the amount of coin and currency in circulation plus reserves.

The primary policy tool used by the Fed to meet its monetary policy goals is:

What supervisory and regulatory authority does the Fed have under current law?

The discount rate is the rate that

Four seats on the FOMC are allocated to Federal Reserve Bank presidents on an annual rotating basis.

How have recent changes in Discount Window credit programs affected the use of this tool for monetary policy?

The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds.

Explain how the deposit multiplier works.