13.5 Structure of the Federal Reserve System

The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the A) Board of Governors. B) chairman of the Board of Governors. C) Federal Open Market Committee. D) Open Market Advisory Council

Federal Open Market Committee.

The Federal Reserve Bank of ________ plays a special role in the Federal Reserve System because it houses the open market desk. A) Boston B) New York C) Chicago D) San Francisco

New York

The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee? A) Philadelphia B) Boston C) San Francisco D) New York

New York

Which of the following functions are not performed by any of the twelve regional Federal Reserve Banks? A) Check clearing B) Conducting economic research C) Setting interest rates payable on time deposits D) Issuing new currency

Setting interest rates payable on time deposits

Which of the following are duties of the Board of Governors of the Federal Reserve System? A) Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash. B) Setting the maximum interest rates payable on certain types of time deposits under Regulation Q. C) Regulating credit with the approval of the president under the Credit Control Act of 1969. D) All governors advise the president of the United States on economics policy.

Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash.

Which of the following are not current duties of the Board of Governors of the Federal Reserve System? A) Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash. B) Setting the maximum interest rates payable on certain types of time deposits under Regulation Q. C) Approving the discount rate established by the Federal Reserve banks. D) Representing the United States in negotiations with foreign governments on economic matters.

Setting the maximum interest rates payable on certain types of time deposits under Regulation Q.

Which of the following is NOT an entity of the Federal Reserve System? A) Federal Reserve Banks B) The Comptroller of the Currency C) The Board of Governors D) The Federal Open Market Committee

The Comptroller of the Currency

Which of the following is an entity of the Federal Reserve System? A) The U.S. Treasury Secretary B) The FOMC C) The Comptroller of the Currency D) The FDIC

The FOMC

Banks subject to reserve requirements set by the Federal Reserve System include A) only nationally chartered banks. B) only banks with assets less than $100 million. C) only banks with assets less than $500 million. D) all banks whether or not they are members of the Federal Reserve System.

all banks whether or not they are members of the Federal Reserve System.

Members of the Board of Governors are A) chosen by the Federal Reserve Bank presidents. B) appointed by the newly elected president of the United States, as are cabinet positions. C) appointed by the president of the United States and confirmed by the Senate as members resign. D) never allowed to serve more than 7-year terms.

appointed by the president of the United States and confirmed by the Senate as members resign.

The research document given to the Federal Open Market Committee that contains information on the state of the economy in each Federal Reserve district is called the A) beige book. B) green book. C) blue book. D) black book.

beige book.

The research document given to the Federal Open Market Committee that contains forecasts of the money aggregates conditional on different monetary policy stances is called the A) beige book. B) green book. C) blue book. D) black book.

blue book.

An important function of the regional Federal Reserve Banks is A) setting reserve requirements. B) clearing checks. C) determining monetary policy. D) setting margin requirements.

clearing checks.

The Feds support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its A) concern over declining Fed membership. B) belief that all banking regulations should be eliminated. C) belief that interest rate ceilings were too high. D) belief that depositors had to become more knowledgeable of banking operations.

concern over declining Fed membership.

The Federal Open Market Committee usually meets ________ times a year. A) four B) six C) eight D) twelve

eight

The Depository Institutions Deregulation and Monetary Control Act of 1980 A) established higher reserve requirements for nonmember than for member banks. B) established higher reserve requirements for member than for nonmember banks. C) abolished reserve requirements. D) established uniform reserve requirements for all banks.

established uniform reserve requirements for all banks.

Each Fed bank president attends FOMC meetings; although only ________ Fed bank presidents vote on policy, all ________ provide input. A) three; ten B) five; ten C) three; twelve D) five; twelve

five; twelve

The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________ term. A) one-year B) two-year C) four-year D) eight-year

four-year

The research document given to the Federal Open Market Committee that contains the forecast of national economic variables for the next two years is called the A) beige book. B) green book. C) blue book. D) black book.

green book.

The Federal Open Market Committees balance of risks is an assessment of whether, in the future, its primary concern will be A) higher exchange rates or higher unemployment. B) higher inflation or a stronger economy. C) higher inflation or a weaker economy. D) lower inflation or a stronger economy.

higher inflation or a weaker economy.

All ________ are required to be members of the Fed. A) state chartered banks B) nationally chartered banks C) banks with assets less than $100 million D) banks with assets less than $500 million

nationally chartered banks

Each governor on the Board of Governors can serve A) only one nonrenewable fourteen-year term. B) one full nonrenewable fourteen-year term plus part of another term. C) only one nonrenewable eight-year term. D) one full nonrenewable eight-year term plus part of another term.

one full nonrenewable fourteen-year term plus part of another term.

The Federal Reserve Banks are ________ institutions since they are owned by the ________. A) quasi-public; private commercial banks in the district where the Reserve Bank is located B) public; private commercial banks in the district where the Reserve Bank is located C) quasi-public; Board of Governors D) public; Board of Governors

quasi-public; private commercial banks in the district where the Reserve Bank is located

Although neither ________ nor the ________ are officially set by the Federal Open Market Committee, decisions concerning these policy tools are effectively made by the committee. A) margin requirements; discount rate B) margin requirements; federal funds rate C) reserve requirements; discount rate D) reserve requirements; federal funds rate

reserve requirements; discount rate

The Federal Open Market Committee consists of the A) five senior members of the seven-member Board of Governors. B) seven members of the Board of Governors and seven presidents of the regional Fed banks. C) seven members of the Board of Governors and five presidents of the regional Fed banks. D) twelve regional Fed bank presidents and the chairman of the Board of Governors.

seven members of the Board of Governors and five presidents of the regional Fed banks.

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually. A) four B) five C) six D) eight

six

Each Federal Reserve bank has nine directors. Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors. A) three; six B) four; five C) five; four D) six; three

six; three

While the discount rate is established by the regional Federal Reserve Banks, in truth, the rate is determined by A) Congress. B) the president of the United States. C) the Senate. D) the Board of Governors.

the Board of Governors.

Prior to 1980, member banks left the Federal Reserve System due to A) the high cost of discount loans. B) the high cost of required reserves. C) a desire to avoid interest rate regulations. D) a desire to avoid credit controls.

the high cost of required reserves.

The majority of members of the Federal Open Market Committee are A) Federal Reserve Bank presidents. B) members of the Federal Advisory Council. C) presidents of member banks. D) the seven Federal Reserve governors.

the seven Federal Reserve governors.

Of all commercial banks, about ________ percent belong to the Federal Reserve System. A) 17 B) 22 C) 37 D) 52

37

The nine directors of the Federal Reserve Banks are split into three categories: ________ are professional bankers, ________ are leaders from industry, and ________ are to represent the public interest and are not allowed to be officers, employees, or stockholders of banks. A) 5; 2; 2 B) 2; 5; 2 C) 4;2;3 D) 3; 3; 3

3; 3; 3

The three largest Federal Reserve banks (New York, Chicago, and San Francisco) combined hold more than ________ percent of the assets of the Federal Reserve System. A) 25 B) 33 C) 50 D) 67

50

There are ________ members of the Board of Governors of the Federal Reserve System. A) 5 B) 7 C) 12 D) 19

7