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Banking
Q:
The primary purpose of meetings of the FOMC is to: A. set the required reserve rate.B. set the discount rate.C. decide on how to influence financial conditions.D. set the prime rate.
Q:
Changes in the federal funds rate influence the economy's growth rate through all of the following except by: A. making it more or less attractive to people save.B. making it more or less expensive to borrow.C. making investment spending more or less attractive.D. altering the real interest rate when inflation is changing quickly.
Q:
The FOMC controls the real interest rate: A. if inflation changes quickly.B. if inflation doesn't change quickly.C. only if it adjusts the federal funds rate to match the changes in the rate of inflation.D. only on an annual basis.
Q:
The federal funds rate is stated as: A. a real interest rate.B. a nominal interest rate.C. a rate that is automatically indexed to inflation.D. the current rate less the expected rate of inflation.
Q:
The federal funds rate is the interest rate: A. the Fed charges banks who borrow from it.B. banks charge each other for overnight loans on excess reserves held at the Fed.C. the U.S. Treasury charges banks that need emergency funds.D. the FDIC charges banks that need to borrow from it to meet depositor demands.
Q:
The interest rate that the FOMC currently chooses to control is: A. the federal funds rate.B. the 30-year Treasury bond rate.C. the discount rate.D. the prime rate.
Q:
The Chairman of the FOMC is: A. the Secretary of the Treasury.B. the Vice-Chairman of the Board of Governors.C. the Chairman of the Board of Governors.D. the President of the New York Fed.
Q:
Which of the following is (are) not a permanent voting member(s) on the FOMC? A. The seven Governors of the FedB. The Secretary of the TreasuryC. The President of the Federal Reserve Bank of New YorkD. The chair of the Board of Governors
Q:
The number of voting members on the Federal Open Market Committee is: A. 7.B. 12.C. 19.D. 8.
Q:
The Federal Open Market Committee began operating in: A. 1913.B. 1929.C. 1914.D. 1936.
Q:
The Federal Reserve's Open Market Committee currently meets: A. monthly.B. bi-weekly.C. eight times a year.D. once every quarter, unless a crisis warrants more frequent meetings.
Q:
Members of the Board of Governors of the Fed: A. can be reappointed after their term expires.B. must leave office when there is a new administration elected.C. serve one non-renewable fourteen-year term.D. are appointed for life, though they can resign at any time.
Q:
The Federal Reserve Act explicitly requires that the Board of Governors represents each of the following, except: A. commercial interests.B. foreign interests.C. financial interests.D. agricultural interests.
Q:
The Board of Governors of the Fed performs each of the following functions, except: A. analyzing financial and economic conditions.B. setting the reserve requirement.C. approving bank merger applications.D. making discount loans.
Q:
The members of the Board of Governors in recent years have been all of the following, except: A. former academic economists.B. former economic forecasters.C. a current Secretary of the Treasury.D. former bankers.
Q:
The Chairman of the Board of Governors: A. serves a four-year term that cannot be renewed.B. is selected from the Board of Governors, appointed by the U.S. President.C. serves the same four-year term as the U.S. President.D. serves an eight-year term.
Q:
To make sure the U.S. President cannot unduly influence the Board of Governors: A. the terms of the governors are staggered.B. the law prevents a resident from appointing more than one governor.C. the terms of the governors are ten years long.D. only three governors can be replaced in any one year.
Q:
The Governors of the Federal Reserve System serve terms of: A. four years that can be renewed.B. fourteen years.C. four years, the same as the U.S. President, and the terms are not renewable.D. seven years.
Q:
The Governors of the Federal Reserve System are appointed by the: A. member banks from their home district.B. Board of Directors of the Reserve Bank from their home district.C. President of the United States.D. Chairman of the Federal Reserve System.
Q:
Current law regarding the Fed's Board of Governors stipulates that: A. no more than three governors can come from the same district.B. no more than two governors can come from the same district.C. every district must have at least one governor on the board.D. no more than one governor can come from the same district.
Q:
How many members are on the Board of Governors of the Federal Reserve System? A. Twelve, one for each districtB. SevenC. NineD. Fourteen
Q:
The Federal Reserve banks play a role in formulating monetary policy by each of the following, except: A. conducting open market operations from their banks.B. participating in FOMC meetings.C. participation in setting the discount rate.D. making discount loans.
Q:
Buying and selling U.S. Treasury Securities for the Fed's own portfolio is called: A. managing the float.B. discount buying.C. open market operations.D. reserve adjustment.
Q:
The largest Federal Reserve District geographically is serviced by: A. the Reserve Bank in San Francisco.B. the Reserve Bank in Chicago.C. the Reserve Bank in New York.D. the districts are divided fairly equally.
Q:
The services the Federal Reserve provides to foreign central banks and other international organizations are handled: A. directly by the Board of Governors in Washington D.C.B. by all of the Reserve Banks.C. only by the Reserve Bank in New York.D. only by the Reserve Bank in San Francisco.
Q:
The Federal Reserve District that covers the largest geographic area is serviced by the Bank located in: A. Chicago.B. Richmond.C. Atlanta.D. San Francisco.
Q:
Which of the following cities has a Federal Reserve Bank located in it? A. DenverB. PhiladelphiaC. DetroitD. Miami
Q:
Which of the following cities does not have a Federal Reserve Bank located in it? A. DenverB. AtlantaC. San FranciscoD. Chicago
Q:
In its role as the bankers' bank, the Federal Reserve performs all of the following services, except: A. collecting and making available data on business conditions.B. making discount loans.C. managing U.S. Treasury borrowings.D. clearing paper checks and transferring funds electronically.
Q:
In its role as bank for the U.S. government, the Federal Reserve performs all of the following services, except: A. issuing new currency.B. making discount loans.C. maintaining the U.S. Treasury's bank account.D. managing U.S. Treasury borrowings.
Q:
Which of the following is a false statement about the structure of the Federal Reserve System? A. Banker and business interests are reflectedB. State and regional interests are reflectedC. Government (public) and private interests are reflectedD. Exporter and importer interests are reflected
Q:
Each president of a Reserve Bank serves for a: A. fourteen-year term.B. five-year term.C. seven-year term.D. two-year renewable term.
Q:
How many members belong to the board of directors for each of the Reserve Banks of the Fed? A. SevenB. NineC. TwelveD. Fourteen
Q:
Each of the Reserve Banks has a president who is: A. appointed by the bank's board of directors but approved by the board of governors.B. appointed by the board of governors but approved by the bank's board of directors.C. elected by the commercial banks in their district.D. selected from the Board of Directors.
Q:
The Reserve Banks of the Federal Reserve System are owned by: A. the taxpayers in their districts.B. the U.S. Treasury.C. the Board of Governors.D. the commercial banks in their districts.
Q:
Considering the Federal Reserve Districts, which of the following is true? A. With the exception of New York, no district coincides with a single state.B. No district coincides with a single state.C. Some districts are made up of single states.D. The districts are divided with equal population.
Q:
The lines drawn to establish Federal Reserve Districts were based on: A. solely population distribution in 1914.B. solely economic forces that existed in 1914.C. economic and political forces that existed in 1914.D. economic and political forces as well as population distribution in 1914.
Q:
The Federal Reserve Bank of New York is unique from other Reserve banks because it: A. is the only regional Bank that serves just one state.B. is the only regional Bank located in a financial center.C. is where the Federal Reserve System's portfolio is managed.D. is the oldest and therefore the largest.
Q:
The largest of the regional Federal Reserve Banks is located in: A. Washington D.C.B. San Francisco since it serves almost one-third of the country.C. New York City.D. Kansas City.
Q:
The number of regional Federal Reserve Banks is: A. nine.B. seven.C. five.D. twelve.
Q:
One reason it took so long to have a central bank in the United States is that: A. it wasn't needed.B. states feared centralization of power.C. state currencies worked fine.D. all of the answer options are correct.
Q:
Currently the requirement of holding a non-interest-bearing reserve account at the Fed must be met by: A. all banks, member or not.B. only member banks.C. member banks and nonmember banks over $100 million in assets.D. only nationally chartered banks.
Q:
Prior to 1980: A. member banks of the Federal Reserve did not have to hold non-interest-bearing reserve deposits at the Fed.B. nonmember banks had to hold non-interest-bearing reserve deposits at the Fed.C. nonmember banks did not have to hold non-interest-bearing reserve deposits at the Fed.D. all banks, member or not, had to hold reserve deposits at the Fed in a non-interest-bearing account.
Q:
The three branches of the Federal Reserve System include each of the following, except: A. the Board of Governors.B. the Federal Deposit Insurance Corporation.C. the Federal Open Market Committee.D. the twelve regional Federal Reserve Banks.
Q:
Considering state chartered banks: A. most elect to join the Federal Reserve System.B. those with assets exceeding $100 million must join the Federal Reserve System.C. most elect not to join the system.D. only those that join the system must abide by reserve requirements.
Q:
Member banks of the Federal Reserve System include: A. only nationally chartered banks.B. all state chartered banks with assets exceeding $100 million.C. nationally chartered banks and state chartered banks that decide to join.D. nationally chartered banks and all state chartered banks.
Q:
The Federal Reserve System is composed of: A. five branches with clear responsibilities.B. six branches with overlapping responsibilities.C. three branches with overlapping responsibilities.D. twelve branches with clear responsibilities.
Q:
The Federal Reserve was created in: A. 1929.B. 1913.C. 1909.D. 1945.
Q:
The system of government in the U.S. has historically been one of checks and balances. Provide examples of these checks and balances as they pertain to the Board of Governors of the Federal Reserve and their relationship to the executive and legislative branches of government.
Q:
Discuss whether a large private organization could function in the role of a lender of last resort, and if it could, what potential problem(s) might arise.
Q:
Explain how a regulation requiring banks to keep a given percentage of deposits in an account paying below market interest rates at the Fed is really a tax on banks.
Q:
If the current number of participating countries in the Euro system is eighteen as of 2014 and the number of large countries is four (Germany, France, Italy, and Spain), are policies likely to favor small or large countries? Explain.
Q:
In terms of the decisions coming from the Euro system's Governing Council, explain why, at times, relatively small countries may be at a distinct disadvantage in terms of monetary policy targets but perhaps have undue influence in terms of the actual policies.
Q:
What argument can you offer to justify the policy prohibiting formal voting during the Euro systems Governing Council meetings?
Q:
What is the difference between the European System of Central Banks and the Euro system?
Q:
Explain why the decision to join the Euro system presents serious domestic monetary policy issues.
Q:
There are several important differences between the Fed and the European Central Bank (ECB). What are they?
Q:
Considering the three branches that make up the Federal Reserve System, identify the corresponding branches that make up the Euro system. Be sure to state which part of the Euro system corresponds to which part of the Federal Reserve System.
Q:
Respond to the following statement with a brief explanation: "The Federal Reserve can improve the performance of the stock market but it cannot prevent a stock market crash."
Q:
Chapter 15 laid out the criteria for an effective central bank. Two of these criteria focused on accountability and transparency. How is accountability achieved for the Federal Reserve and is it clear?
Q:
In the mid 1930s, the Federal Reserve became more independent from political pressure. What significant changes occurred then to increase the Fed's independence?
Q:
Given the democratic political structure of the United States, make an argument against the independence granted the Federal Reserve.
Q:
What are the three criteria that are used to judge a central bank's independence and how does the Fed stack up to each of these criteria?
Q:
Why can it be argued that, while interest rate decisions are made by the FOMC, a committee, the real power of the committee lies with the Chairman of the Federal Reserve System?
Q:
If it is the real rate of interest that savers and borrowers respond to, how does the Fed impact a real rate by targeting a nominal rate of interest?
Q:
Who makes up the voting members of the Federal Reserve's Open Market Committee?
Q:
In what ways do the regional Federal Reserve Banks influence monetary policy?
Q:
Why can't two Governors of the Fed come from the same district and does this limitation make sense today?
Q:
Why is it technically incorrect to say that the board of directors of the regional Fed banks set the discount rate that each bank charges?
Q:
The Federal Reserve is the U.S. government's bank. Identify the functions the Fed performs in this role.
Q:
How are the locations of the twelve regional Federal Reserve Banks and the corresponding districts explained?
Q:
Why are so few state chartered banks members of the Federal Reserve System?
Q:
Predict how monetary policymaking would change, if at all, if members of the Board of Governors of the Federal Reserve were popularly elected to two-year terms and could run for re-election.
Q:
Explain why inflation is a way for governments to default on a portion of the debts they owe.
Q:
Why might Congress actually prefer the higher rate of inflation that might result from deficit spending to higher taxes and/or a cut in government spending?
Q:
Using the U.S. as an example, explain why rising budget deficits on the part of a federal government creates a potential point of conflict between fiscal and monetary policymakers.
Q:
Imagine a central banker who takes office believing that, ultimately, the best way to stimulate an economy is to keep people guessing. This means the policymaker will often, but not always, announce one change but then actually do something else. What do you think of the central bank's chances for achieving its objectives and why?
Q:
Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.
Q:
The Federal Reserve didn't always communicate its actions to the public like it does today. As recently as the mid 1990s, secrecy ruled. Why do you think the Fed and most central banks now are more public about their actions and the reasons for them?
Q:
The text points out that the apparent result of central bank independence has been better performing economies. Why do you think it took so long for many countries to create independent central banks?