ch 13

What percentage of all banks in the United States belong to the Federal Reserve System?

38%

Congress authorized a second Bank of the United States partly in response to:

difficulty in funding the War of 1812

The beige book is prepared by

district banks.

The facts show that the political business cycle theory

doesn't generally support the political business cycle theory.

The Federal Reserve district banks

engage in monetary policy directly through discount lending.

Which of the following does not serve on the Governing Council of the European Central Bank?

finance ministers of each country

What is the length of a term for the Chairman of the Board of Governors?

four years

The national economic forecast for the next two years prepared by the staff of the Board of Governors is published in the

green book.

The main argument against Fed independence is that

in a democracy elected officials should make public policy.

The principal-agent view of Fed motivation predicts that the Fed acts

in order to increase its power, influence, and prestige.

Which of the following is the mandate of the European Central Bank?

price stability

The margin requirement set by the Federal Reserve is the

proportion of the purchase price of a security that an investor must pay in cash.

The Depository Institutions Deregulation and Monetary Control Act of 1980

required all banks to maintain reserve deposits with the Fed.

Members of the Board of Governors

serve one nonrenewable fourteen-year term.

Which of the following is NOT a role of Federal Reserve Banks?

set the interest rate on reserves

Federal Reserve district banks perform all of the following roles EXCEPT

setting the federal funds rate.

Which groups were opposed to the Bank of the United States?

southern and western agrarian and small-business interests

The political business cycle theory predicts that

the Fed acts to stimulate economic activity before an election.

During World War II

the Fed agreed to hold interest rates on short-term Treasury securities at low levels.

What new authority did the ECB receive in 2012?

the authority to oversee the banking systems of all member countries

The Chairman of the Federal Open Market Committee is also

the chairman of the Board of Governors.

The public interest view of Fed motivation holds that the Fed acts in the interest of

the general public

Who owns the Federal Reserve banks?

the private commercial banks in each district which are members of the Federal Reserve System

The issue of Fed independence is most often raised by

the public's negative reaction to Fed policy.

To conduct open market operations, the FOMC issues a directive to

the trading desk at the Federal Reserve Bank of New York.

The National Monetary Commission

was created by Congress to study the setting up of a central bank.

When did the Federal Reserve Act become law?

1913

Which of the following statements is correct?

The Fed's profits are substantial, even when compared to the largest U.S. corporations.

What is the name of the entity, composed of Federal Reserve district bankers, that consults on monetary policy?

The Federal Advisory Council

In 2010, doubts were raised about the debt of all of the following countries EXCEPT

) Poland.

Assuming a required reserve ratio of 5%, interest rate on reserves of 1%, and interest rate on loans of 6%, what is the effective cost of the reserve requirement on a $10,000 deposit?

0.25%

Assuming a required reserve ratio of 8%, interest rate on reserves of 0.5%, and interest rate on loans of 4%, what is the effective cost of the reserve requirement on a $1000 deposit?

0.28%

How many Federal Reserve districts are there?

12

The movement to set up a central bank in the United States was spurred by the financial panic that occurred in

1907.

Which of the following statements regarding member banks is true?

A minority of banks are part of the Federal Reserve System, BUT they have a majority of deposits.

Who organized the Bank of the United States?

Alexander Hamilton

Which president failed to renew the charter of the Second Bank of the United States?

Andrew Jackson

Which central bank gained the power to set interest rates independent of the government in the late 1990s?

Bank of England

The first Fed chair to hold a press conference was:

Ben Bernanke

In January 2010, President Obama appointed which of the following to be chair of the Federal Reserve?

Bernanke

Who sets the inflation target for the Bank of England?

Chancellor of the Exchequor

The Dodd-Frank Act removed which group from decisions regarding the presidents of Federal Reserve Banks?

Class A directors

The members of Federal Reserve district bank boards of directors who are bankers are known as

Class A directors.

The members of Federal Reserve district bank boards of directors who are leaders in industry, commerce, and agriculture are known as

Class B directors.

The members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as

Class C directors.

The members of Federal Reserve district bank boards of directors who represent the public interest are known as

Class C directors.

Which of the following cities contains a Federal Reserve bank?

Dallas

Which of the following is NOT considered one of the four groups in the Federal Reserve System?

Federal Deposit Insurance Corporation

Which of the following statements is correct?

Federal Reserve district banks pay dividends on their earnings to member banks.

Former Fed chair Alan Greenspan's use of ambiguous and vague language came to be known as:

Fedspeak

Which country was least supportive of expansionary policy by the European Central Bank during the Financial Crisis of 2007-2009?

Germany

If a member of the Board of Governors is limited to one 14-year term, how did Alan Greenspan serve 19 years on the Board of Governors?

He completed the remaining years left on someone else's term and then served one 14-year term.

Which of the following statements about the Depository Institutions Deregulation and Monetary Control Act of 1980 is NOT correct?

It eliminated restrictions on interstate banking for member banks.

What is the main reason the Fed operates in a political arena?

It lacks a constitutional mandate.

Who had served as a de facto lender of last resort during the 1907 panic?

J. P. Morgan

Which of the following cities does NOT contain a Federal Reserve bank?

Los Angeles

Which of the following men has NOT served as Chairman of the Board of Governors?

Milton Friedman

The president of which Federal Reserve bank is always a voting member of the Federal Open Market Committee?

New York

Why did fewer state banks choose to become or remain members of the Federal Reserve System during the 1960s and 1970s?

Nominal interest rates rose.

Why might Congress benefit from the Fed being self-financed?

Self-financing gives the Fed an incentive to expand the money supply, which ultimately results in Congress having additional funds to spend.

Which of the following countries had an unemployment rate in excess of 20% as of late 2012?

Spain

Why has the Federal Reserve chairman often been called the second most important person in terms of affecting the economy?

The Fed is in control of monetary policy.

Which of the following statements is correct?

The Fed is only partially insulated from external pressures.

Which of the following appears to be evidence against the public interest view of the Fed's motivation?

The failure of the Fed to emphasize the goal of price stability.

Which best describes the Federal Reserve district banks?

They are private-government joint ventures.

Which of the following officially ended the cooperation between the Treasury and the Fed that had taken place during World War 2?

Treasury-Federal Reserve Accord

The Bank of the United States faced opposition from which of the following?

all of the above

Members of the Board of Governors are

appointed by the President of the United States, subject to confirmation by the Senate.

In 2012, the House of Representatives voted to have what type of audit of the Fed?

auditing of monetary policy decisions

Which of the following is NOT a way in which power was divided up in the Federal Reserve System?

between importers and exporters

In 1913, Congress and the President did not envision that the Fed would control

broad control over most aspects of money and the banking system.

How does the Fed reach its target for the federal funds rate?

by adjusting the level of reserves

How did the Fed peg interest rates during World War 2?

by agreeing to purchase any bonds that were not purchased by private investors

Which of the following is NOT a responsibility of the Board of Governors?

carrying out open market operations

All of the following help make the Fed independent of the political process EXCEPT

chair of Fed receives a lifetime appointment.

Generally,

countries with the most independent central banks have the lowest inflation rates.

Federal Reserve districts

cut across state and economic boundaries

The Banking Acts of 1933 and 1935

increased central control of the Federal Reserve System.

In the early post-war years, the Fed was reluctant to continue its wartime agreement with the Treasury because it believed the result would be

inflation.

Most of the Fed's earnings come from

interest on the securities it holds.

The Fed does not have to go through the normal congressional appropriations process because

it is self financing.

The original intent of the Federal Reserve Act of 1913 was to provide the Fed with what role?

lender of last resort

Which of the following is the most common goal for central banks of industrialized countries?

low inflation

The main argument in favor of Fed independence is that

monetary policy is too important and too technical to be determined in the political arena.

Under the Federal Reserve Act, which banks must be members of the Federal Reserve System?

national banks

Apart from the United States, in countries where central bank board members serve fixed terms of office,

none have terms as long as fourteen years.

Which of the following is NOT an activity carried out by Federal Reserve district banks?

open market operations