Q&A Hero

Q: There are ______ members of the Federal Reserve Board of Governors, _______ members of the Federal Open Market Committee, and ________ Federal Reserve Banks. a. 12; 7; 12 b. 7; 14; 12 c. 14; 12; 12 d. 7; 12; 12

Q: Who among the following does NOT have a permanent vote on the FOMC? a. President, Federal Reserve Bank of New York b. Chairman, Board of Governors c. President, Federal Reserve Bank of Los Angeles d. Members of the Board of Governors

Q: Reforms and regulatory changes in U.S. financial institutions are best associated with: a. international events affecting U.S. financial institutions. b. periods of severe economic and financial problems in the U.S. economy. c. voter changing the majority party in Congress. d. recommendations of presidential commissions.

Q: Which of the following can be associated with the modern objectives of the Fed? a. coordinate an efficient payments mechanism. b. provide an elastic money supply. c. regulate the financial system. d. all of the above.

Q: Increases in the Fed's assets a. decrease the monetary base b. increase the monetary base c. have no effect on the monetary base. d. none of the above

Q: The Federal Reserve System established a. a system for federal chartering of banks. b. a system for controlling bank note issuance. c. a source of liquidity for the banking system. d. the beginning of demand deposit accounts.

Q: Which of the following was a responsibility of the early Federal Reserve System? a. to control the money supply b. to safeguard the national payment system c. to establish a more rigorous bank supervisory system d. all of the above

Q: The Fed's non-monetary or regulatory powers do NOT include a. Margin requirements b. Interest rate disclosures on deposits c. Investigation and prosecution of counterfeiting d. Bank holding companies

Q: The Fed's most visible monetary tool is probably a. open market operations. b. change in reserve requirements. c. Reg Z. d. discount rate policy

Q: Which of the following is in the correct historical order? a. Second Bank of the United States, Federal Reserve Act, Crash of 1907 b. Crash of 1907, Federal Reserve Act, National Banking Acts c. First Bank of the United States, Crash of 1907, National Banking Acts d. Second Bank of the United States, National Banking Acts, Federal Reserve Act

Q: The purchase of government securities by the Fed will a. decrease the money supply. b. increase security prices. c. increase interest rates. d. decrease credit availability.

Q: The 12 Federal Reserve Banks are a. Important and autonomous components of a "decentralized central bank" b. Important components of the Fed, but no longer very autonomous c. Neither important nor autonomous d. All permanently voting members of the FOMC

Q: The Fed's primary tools of monetary policy include all the following except a. changing the discount rate. b. open market operations. c. adjusting reserve requirements. d. changes in the Federal Funds rate.

Q: Reserve requirements apply to a. National banks b. State banks c. Savings-and-loan associations d. All of the above

Q: To increase the money supply immediately but just slightly, the Fed would most likely a. Buy securities on the open market b. Lower the Discount Rate c. Lower reserve requirements d. Any of the above would be suitable for this purpose.

Q: Which Fed action does NOT directly increase total reserves in the banking system?a. Lowering the Discount Rateb. Lowering reserve requirementsc. Buying U.S. Government securities on the open marketd. None of the above

Q: When the New York Fed sells Treasury securities to a securities dealer a. depository institutions deposits in the Fed decrease. b. depository institutions deposits in the Fed increase. c. the deposit balance of the security dealer in its bank decreases. d. both a and c above.

Q: Federal Reserve float a. is the "lag time" required for monetary policy to take effect b. represents a net extension of credit by the Fed, which increases bank reserves. c. represents a net liability of the Fed. d. is DACI minus CIPC.

Q: Federal Reserve notes held in bank vaults are the liability or obligation of a. the Fed. b. the Treasury. c. the bank. d. none of the above

Q: For what purposes do depository institutions keep deposits in the Federal Reserve banks? a. for clearing checks b. to satisfy reserve requirements c. to earn interest d. a and b

Q: The Treasury draws most of its checks upon a. the Comptroller of the Currency. b. national banks. c. Federal Reserve banks. d. its own required reserves

Q: The asset of Federal Reserve banks associated with open market operations is a. Federal Reserve notes. b. U.S. government securities. c. loans to member banks. d. float.

Q: The data above could exemplify a direct, immediate effect of any of the following except a. an open market sale by the Fed b. a lowering of reserve requirements by the Fed c. a new loan at the Discount Window by the Fed d. an open market purchase by the Fed

Q: The data above exemplify a. an arguable underutilization of resources, at least for the moment b. an excess reserve position c. a near-term likelihood that loans and deposits will expand d. all of the above

Q: Use this data to answer questions 4-6:Total Reserves $80,000,000; Reserve Requirement 5%; Total Deposits $700,000,000.Using the data above, the level of excess reserves isa. $ 4,000,000b. $ 45,000,000c. $ 70,000,000d. not ascertainable

Q: The primary responsibility of the Federal Open Market Committee (FOMC) is toa. set monetary policyb. supervise and examine member banks.c. guarantee excess reserves to National Banks.d. enforce margin requirements

Q: Which of the following can be associated with original objectives of the Fed? a. coordinate an efficient payments mechanism. b. provide an elastic money supply. c. serve as lender of last resort. d. all of the above

Q: Number of Federal Reserve Governors plus size of FOMC less number of Federal Reserve banks equals: a. 9. b. 7. c. 14. d. 12.

Q: If the FOMC wished to slow down economic growth and lower down the price level, they could issue a policy directive to the Federal Reserve Board Trading desk to purchase U.S. government securities.

Q: The current chair of Federal Reserve is Joe Biden.

Q: The seven members of the Board of Governors of the Federal Reserve System serve 14 year nonrenewable terms. Each Board member is appointed by the President and confirmed by the Senate.

Q: The major asset of the Federal Reserve is the U.S. Treasury securities, and the major liability is currency outside banks.

Q: The monetary base comprises currency in circulation and checks not yet cleared.

Q: Excess reserves cost a depository institution nothing to maintain.

Q: Margin requirements are an important regulatory power of the Fed.

Q: All national banks must join the Federal Reserve System.

Q: The Chairman of the Fed is highly visible, but not very powerful.

Q: Reserve requirements apply only to member banks in Federal Reserve System.

Q: No two Governors may be from the same Federal Reserve District.

Q: The Federal Reserve Bank of New York is the "headquarters" of open market operations.

Q: The "monetary base" comprises the Fed's most important assets.

Q: Reserve requirements are not considered a viable tool of monetary policy.

Q: Though decentralized in geography, today's Fed is highly centralized in power structure.

Q: As the Fed expands the monetary base, bank loans and investments should expand also.

Q: A Fed governor has a lifetime appointment.

Q: Open Market Operations are the primary tool of monetary policy today.

Q: Excess reserve balances pay interest; required reserve balances do not.

Q: Congress is powerless over the Fed.

Q: The Federal Reserve System replaced the National Banking system.

Q: The Fed is this nation's first permanent central bank.

Q: The Discount Rate is a direct control on the money supply.

Q: Deposits should expand when the Fed sells securities.

Q: The first impact of monetary policy upon depository institutions is via excess reserves.

Q: The Fed can change the level of member bank reserves as well as reserve requirements.

Q: Monetary policy is a highly partisan issue.

Q: Open market purchases by the Fed reduce total reserves in the banking system.

Q: An increase in the money supply does not affect the supply of loanable funds.

Q: A decrease in reserve requirements increases the total level of member bank reserves.

Q: Currency is an asset of the Federal Reserve Banks.

Q: A decrease in Federal Reserve float decreases member bank reserves.

Q: In the check-clearing system DACI usually exceeds CIPC, creating Fed float.

Q: The Federal Reserve is independently funded and thus immune to any political pressure.

Q: A primary function of the Fed is economic stabilization via control of the money supply.

Q: The Federal Open Market Committee basically establishes our nation's monetary policy.

Q: Depository institutions create money when they lend or invest excess reserves.

Q: Federal Reserve regulations affect many nonbank institutions.

Q: The Fed's most influential tool is reserve requirements.

Q: Deposits should expand when reserve requirements increase.

Q: Discuss the major functions provided by investment banks and security firms.

Q: List and briefly describe the main risks managed by financial intermediaries.

Q: Explain how and why the secondary capital markets play an important role in our economy. How do secondary markets assist the primary market?

Q: Explain financial intermediation and its benefits.

Q: Secondary markets help support primary markets because secondary markets a. offer primary market purchasers liquidity for their holdings b. reduce the cost of trading the primary market claims c. help investors diversify portfolios d. update the price or value of the primary market claims e. all above

Q: Match the financial institutions with the characteristic that best describes its function.I. Pool funds of small savers and invest in either money or capital marketsII. Provide economic protection from adverse eventsIII. Provide consumer loans and real estate loans funded by depositsIV. Underwrite and trade securities and provide brokerage servicesV. Accumulate and transfer wealth from work period to retirement period1.Credit unions2.Insurance companies3.Pension funds4.Securities firms and investment banks5.Mutual fundsa. 1, 3, 2, 5, 4b. 4, 2, 3, 5, 1c. 5, 2, 1, 4, 3d. 2, 4, 5, 3, 1e. 5, 1, 3, 2, 4

Q: The diagram below is a diagram of thea. secondary marketsb. primary marketsc. money marketsd. derivatives marketse. commodities markets

Q: Corporations list their securities on exchanges in order to a. pay an annual listing fee and disclose important information. b. enhance the liquidity of their securities for investors. c. sell more securities. d. increase the size of the firm.

Q: Financial markets provide financial institutions: a. a place to securitize assets. b. a source of generating fee income from trading. c. a source of funding. d. all of the above.

Q: Large industrial U.S. corporations are involved in the money market by a. investing excess cash balances. b. buying and selling goods on credit in international trade. c. issuing commercial papers and short-term corporate notes. d. all of the above

Q: Which of the following bank money market securities is backed by specified collateral? a. negotiable CDs b. banker's acceptances c. repurchase agreements d. commercial paper(d)

Q: The money market security represented by the largest dollar amount outstanding is a. commercial paper. b. federal agency issues. c. negotiable CDs. d. Treasury bills.