Chapter 4 Pre-Work

As of 2018, Greece owed the EU and IMF roughly _____.

$330 billion

The ________ system is the wire transfer system operated by the Federal Reserve Bank for the secure transfer of government securities between investors.

Fedwire

Throughout the spring of 2010, _____ struggled with a severe debt crisis and the ECB, Germany, and France formulated an aid plan to bail out the country.

Greece

Select all that apply The supervisory and regulatory activities of each Federal Reserve Bank in its district includes the authority to do which of the following?

Issue warnings Approve expanded activities Performs examinations and inspections

The most important of the Federal Reserve Banks is generally considered to be

New York.

The trading desk through which the Federal Reserve implements monetary policy is located in

New York.

Members of the Federal Reserve Board are appointed by the President but must be confirmed by the

Senate.

True or false: During the Financial Crisis, coordinated effort by the central banks of 11 major countries accounted for the bulk of the economic rescue programs.

True

The _________ creates federal laws intended to protect consumers in financial transactions, and the ___________ implement those laws.

U.S. Congress; Federal Reserve Banks

Select all that apply The three tools that the Federal Reserve Bank can use to implement monetary policy are

adjusting bank reserve requirements. adjusting the discount rate. executing open market operations.

When the Federal Reserve implements monetary policy by targeting the money supply (currency and bank reserves), movement of the demand curve for money around a fixed supply curve causes interest rates to

be volatile.

Select all that apply Four of the programs implemented by central banks to alleviate the effects of the Financial Crises were

capital injections into the banking system. the expansion of retail deposit insurance. asset purchases or guarantees. debt guarantees.

The Federal Reserve Bank, the Bank of England, the Reserve Bank of India, and the People's Bank of China are all examples of

central banks.

One of the problems with using the discount rate as a monetary policy tool is that it is difficult to predict ________ when the discount rate changes.

changes in discount window borrowing

The Federal Reserve serves as the __________ for the U.S. Treasury, holding the deposit accounts and collateral for government agencies.

commercial bank

The _________ at the Federal Reserve Banks engage in a variety of activities to help the public understand and address issues that affect low and moderate income people and regions.

community affairs offices

Select all that apply The four major functions of the Federal Reserve Bank are to

conduct monetary policy. manage the stability of the financial system. provide payment and other financial services. supervise and regulate depository institutions.

Federal Reserve Banks are responsible for the collection and replacement of _________ from circulation.

currency

The two largest liabilities on the Federal Reserve balance sheet are ________ and ________.

currency in circulation; reserves

The Federal Reserve Banks distribute new ________ to meet the public need for _______.

currency; cash

When the Federal Reserve wants to increase the supply of bank deposits in the system and hence the money supply, they _______ the level of required reserves.

decrease

Lowering domestic interest rates can cause the dollar's foreign exchange rate to ________, resulting in a(n) ________ in U.S. exports.

decrease; increase

When the Federal Reserve sells U.S. Treasury securities from the over-the-counter market, it _______ the supply of excess reserves and places _______ pressure on the federal funds rate.

decreases; upward

On the Fed balance sheet, reserves consist of ___________ and ___________.

depository institution reserves; vault cash

Each of the twelve Federal Reserve Banks sets and changes the ________ that they charge on loans to financial institutions in their district.

discount rate

Each Federal Reserve Bank's ________ makes cash loans to financial institutions by discounting eligible short-term securities at the official ________.

discount window; discount rate

The Federal Reserve Bank uses its tools to influence either the demand for or supply of _________ at depository institutions.

excess reserves

The President designates two board members to be the chairman and vice chairman for _______-year terms.

four

A central bank is said to be "independent" if it is

free from pressure from politicians.

When the Federal Reserve wants to decrease the supply of bank deposits in the system and hence the money supply, they _______ the level of required reserves.

increase

When the Federal Reserve buys U.S. Treasury securities from the over-the-counter market, it _______ the supply of excess reserves and places _______ pressure on the federal funds rate.

increases; downward

The Federal Reserve System is a(n)

independent central bank.

Select all that apply When the Fed _______ the discount rate, they are sending a signal to the market that they would like to see ________ interest rates and ________ borrowing.

lowers; lower; more raises; higher; less

Changes in the excess reserves held by depository institutions directly influences the _______ and the _______.

money supply; interest rates

The repeated issuing of new loans and creation of new deposits triggered by a change in the reserve requirement results in a total change in bank deposits that is many times different than the original change in reserves. This is called the

multiplier effect.

Each Federal Reserve Bank has its own _______-member board of directors.

nine

The purchase and sale of U.S. government securities by the trading desk at the New York Fed under the direction of the FOMC is called

open market operations.

Of the three monetary policy tools the Federal Reserve has at their disposal, only ________ and _________ work by changing the level of bank deposits and thus the money supply.

open market operations; reserve requirement changes

Select all that apply The main responsibilities of the FOMC are to formulate policies to

promote price stability. promote full employment. promote economic growth. maintain a sustainable pattern of international trade.

One important way in which the Federal Reserve Banks provide assistance in the conduct of monetary policy is by

providing five Federal Reserve Bank presidents to serve on the FOMC board members.

Each Federal Reserve Bank has supervisory and regulatory authority over the activities of ___________ and ___________ located in their districts.

state-chartered member banks; bank holding companies

When the Federal Reserve implements monetary policy by targeting the money supply (currency and bank reserves), it fixes the ________ while letting the ________ fluctuate.

supply curve; demand curve

Federal Reserve Banks operate under the general supervision of

the Board of Governors of the Federal Reserve.

The chair of the Federal Open Market Committee is

the chair of the Board of Governors.