ECON 2035 CH 13
A majority of the members of the boards of the 12 Federal Reserve Banks are A) elected by bankers. B) appointed by the president. C) appointed by the Fed Chairman. D) elected by the District Bank presidents.
A
Apart from the United States, in countries where central bank board members serve fixed terms of office A) none have terms as long as fourteen years. B) many serve for life or good behavior. C) all have terms longer than fourteen years. D) the head of the central bank rarely has a term longer than one year.
A
Generally A) countries with the most independent central banks have the lowest inflation rates. B) countries with the least independent central banks have the lowest inflation rates. C) countries without central banks have the lowest inflation rates. D) the degree of independence of a countrys central banks has little to do with its inflation rate.
A
The Beige Book is prepared by A) district banks. B) the Board of Governors. C) FOMC staff members. D) the Commerce Department.
A
The Dodd-Frank Act removed which group from decisions regarding the presidents of Federal Reserve Banks? A) Class A directors B) Class B directors C) Class C directors D) Board of Governors
A
The National Monetary Commission A) was created by Congress to study the setting up of a central bank. B) authorizes open market operations. C) oversees nationally chartered banks. D) chooses Federal Reserve district bank presidents.
A
The main argument against Fed independence is that A) in a democracy, elected officials should make public policy. B) monetary and fiscal policy would be easier to coordinate if the Fed were not independent. C) the Fed has proven irresponsible on many occasions. D) congressional control was tried during the 1960s and it worked well.
A
The margin requirement set by the Federal Reserve is the A) proportion of the purchase price of a security that an investor must pay in cash. B) difference between the interest rate banks may charge on loans and the interest rate they receive from deposits. C) same thing as the required reserve ratio on deposits. D) difference banks must maintain between the value of their assets and the value of their liabilities.
A
The members of Federal Reserve district bank boards of directors who are bankers are known as A) Class A directors. B) Class B directors. C) Class C directors. D) Class D directors.
A
The national economic forecast for the next two years prepared by the staff of the Board of Governors is published in the A) Green Book. B) Beige Book. C) Blue Book. D) Fed Book.
A
The public interest view of Fed motivation holds that the Fed acts in the interest of A) the general public. B) banks. C) Congress. D) itself.
A
To conduct open market operations, the FOMC issues a directive to A) the Open Market Desk at the Federal Reserve Bank of New York. B) the Board of Governors in Washington, D.C. C) the presidents of the district banks. D) the chairman of the New York Stock Exchange.
A
What is the main reason the Fed operates in a political arena? A) It lacks a constitutional mandate. B) The members of the Board of Governors must run for reelection every fourteen years. C) The members of the Board of Governors are typically prominent politicians. D) It is under the direct control of Congress.
A
Which central bank gained the power to set interest rates independent of the government in the late 1990s? A) Bank of England B) Bank of Canada C) Bank of China D) Federal Reserve Bank
A
Which of the following is NOT an activity carried out by Federal Reserve district banks? A) open market operations B) issuing new Federal Reserve Notes C) making discount loans D) examining state member banks
A
Which of the following men has NOT served as Chairman of the Board of Governors? A) Milton Friedman B) Arthur Burns C) Paul Volcker D) Alan Greenspan
A
Who is considered to wield the most power in the Federal Reserve System? A) the Fed chair B) member banks C) the Treasury Secretary D) the president of the Federal Reserve Bank of New York
A
Who organized the Bank of the United States? A) Alexander Hamilton B) George Washington C) Andrew Jackson D) Woodrow Wilson
A
Who owns the Federal Reserve banks? A) the private commercial banks in each district which are members of the Federal Reserve System B) those households which have purchased stock in Federal Reserve System C) the federal government D) the governments of the states in which the banks are located
A
Why did fewer state banks choose to become or remain members of the Federal Reserve System during the 1960s and 1970s? A) Nominal interest rates rose. B) The required reserve ratio rose. C) The discount rate rose. D) Open market operations declined.
A
All of the following help make the Fed independent of the political process EXCEPT A) financial independence. B) the chair of the Fed receives a lifetime appointment. C) board members receive a long, nonrenewable appointment. D) board members; terms expire at different times, reducing the possible number of appointees by any one president.
B
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? A) 0.05% B) 0.25% C) 0.30% D) 1%
B
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 $1,000 deposit? A) 0.05% B) 0.28% C) 0.32% D) 4%
B
Congress authorized the Second Bank of the United States partly in response to A) difficulty in funding the American Revolution. B) difficulty in funding the War of 1812. C) difficulty in funding the Industrial Revolution. D) difficulty in funding the Civil War.
B
How did the Fed peg interest rates during World War II? A) by setting a low federal funds rate B) by agreeing to purchase any bonds that were not purchased by private investors C) through extensive use of discount loans D) through nationalization of the banking system
B
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 A) recession. B) inflation. C) higher taxes. D) lower taxes.
B
Members of the Board of Governors are A) elected by the district bank presidents. B) appointed by the President of the United States, subject to confirmation by the Senate. C) appointed by the National Monetary Commission. D) appointed by the Securities and Exchange Commission, subject to congressional veto.
B
Most of the Fed's earnings come from A) fees charged to financial institutions for check clearing. B) interest on the securities it holds. C) interest on discount loans. D) congressional appropriations.
B
The Banking Acts of 1933 and 1935 A) established the Federal Reserve System. B) increased central control of the Federal Reserve System. C) eliminated the authority of the Board of Governors to set reserve requirements. D) made the Secretary of the Treasury a member of the Board of Governors.
B
The Federal Reserve Act of 1913 made who the chairman of the Federal Reserve Board? A) the vice-president of the United States B) the secretary of the Treasury C) the comptroller of the currency D) the chancellor of the Exchequer
B
The Federal Reserve district banks A) do not engage in monetary policy. B) engage in monetary policy directly through discount lending. C) engage in monetary policy directly through open market operations. D) engage in monetary policy directly through their membership on Federal Reserve committees.
B
The chair of the Federal Reserve is A) chosen by the members of the Board of Governors. B) chosen by the president. C) elected by Congress. D) the Treasury Secretary.
B
The members of Federal Reserve district bank boards of directors who are leaders in industry, commerce, and agriculture are known as A) Class A directors. B) Class B directors. C) Class C directors. D) Class D directors.
B
The movement to set up a central bank in the United States was spurred by the financial panic that occurred in A) 1816. B) 1907. C) 1929. D) 1987.
B
The only state to have two Federal Reserve District Banks is A) Pennsylvania. B) Missouri. C) California. D) Texas.
B
The original intent of the Federal Reserve Act of 1913 was to provide the Fed with what role? A) regulator of the banking system B) lender of last resort C) manage the exchange rate D) maintain a balanced budget
B
The political business cycle theory predicts that A) the Fed acts to promote the interests of the general public. B) the Fed acts to stimulate economic activity before an election. C) the presidents appointments to the Board of Governors will usually be politicians. D) political factors over which the Fed has no control are most important in explaining the business cycle.
B
Under the Federal Reserve Act, which banks must be members of the Federal Reserve System? A) all commercial banks B) national banks C) state banks D) all banks with capital in excess of $100 million
B
What is the length of a term for the Chairman of the Board of Governors? A) one year B) four years C) 14 years D) 28 years
B
What is the name of the entity, composed of Federal Reserve district bankers, that consults on monetary policy? A) The Federal Open Market Committee B) The Federal Advisory Council C) The Monetary Policy Council D) The District Bank Committee
B
What percentage of all commercial banks in the United States belong to the Federal Reserve System? A) 5% B) 34% C) 75% D) 90%
B
When did the Federal Reserve Act become law? A) 1836 B) 1913 C) 1936 D) 1951
B
Which of the following appears to be evidence against the public interest view of the Feds motivation? A) the conflict with the Treasury over interest rate fixing during World War II B) the failure of the Fed to emphasize the goal of price stability C) the unwillingness of the Fed to turn over its excess profits to the Treasury D) the independence of Fed chairmen from the authority of the president
B
Which of the following is NOT considered one of the four groups in the Federal Reserve System? A) Federal Reserve banks B) Federal Deposit Insurance Corporation C) Board of Governors D) Federal Open Market Committee
B
Which of the following is the mandate of the European Central Bank? A) high economic growth B) price stability C) low unemployment D) a fixed exchange rate
B
Which of the following statements regarding member banks is TRUE? A) A majority of banks are part of the Federal Reserve System, and they hold a majority of all bank deposits. B) A minority of banks are part of the Federal Reserve System, but they hold a majority of all bank deposits. C) A majority of banks are part of the Federal Reserve System, but they hold a minority of all bank deposits. D) A minority of banks are part of the Federal Reserve System, and they hold a minority of all bank deposits.
B
Which of the following was NOT advocated by former Texas Congressman Ron Paul? A) abolishing the Fed B) making the Fed Board of Governors lifetime appointments C) returning to the gold standard D) 100% reserve banking
B
Which president failed to renew the charter of the Second Bank of the United States? A) George Washington B) Andrew Jackson C) Franklin Roosevelt D) Lyndon Johnson
B
Who had served as a de facto lender of last resort during the 1907 panic? A) The U.S. Treasury B) J. P. Morgan C) Henry Ford D) John D. Rockefeller
B
Who sets the inflation target for the Bank of England? A) Prime Minister B) chancellor of the Exchequer C) head of the monetary policy committee D) majority vote of the monetary policy committee
B
As of 2015, the dividend the Fed pays to member banks with assets greater than $10 billion is A) 2%. B) 6%. C) the lesser of 6% or the interest rate on 10-year Treasury notes. D) the greater of 6% or the interest rate on 10-year Treasury notes.
C
During World War II A) the Board of Governors was temporarily disbanded. B) the Fed was not allowed to make discount loans. C) the Fed agreed to hold interest rates on short-term Treasury securities at low levels. D) the Fed agreed not to buy Treasury securities.
C
Federal Reserve district banks perform all of the following roles EXCEPT A) managing check clearing in the payments system. B) performing regulatory functions. C) setting the federal funds rate. D) managing currency in circulation by issuing new Federal Reserve notes.
C
How does the Fed reach its target for the federal funds rate? A) by changing the discount rate B) by changing reserve requirements C) by buying and selling Treasury securities D) by directly setting the federal funds rate
C
How many Federal Reserve districts are there? A) 1 B) 2 C) 12 D) 50
C
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? A) A special exemption was approved for him. B) The rule was not in place at the time. C) He completed the remaining years left on someone else's term and then served one 14-year term. D) He didnt serve consecutive terms.
C
In 1976, Congress passed legislation which requires most federal government agencies to give public notice before a meeting. This legislation is the A) Increased Transparency Act. B) No-Stone- Unturned Act. C) Government in the Sunshine Act. D) Dodd-Frank Act.
C
In 2010, doubts were raised about the debt of all of the following countries EXCEPT A) Ireland. B) Greece. C) Poland. D) Portugal.
C
Private banks in each region which are part of the Federal Reserve System elect A) 2 members of the regional Reserve Banks board of directors. B) 3 members of the regional Reserve Banks board of directors. C) 6 members of the regional Reserve Banks board of directors. D) the president of the regional Reserve Banks board of directors.
C
The Depository Institutions Deregulation and Monetary Control Act of 1980 A) eliminated the requirement that banks hold reserve deposits with the Fed. B) required all state banks to join the Federal Reserve System. C) required all banks to maintain reserve deposits with the Fed. D) prohibited nonmember banks from receiving discount loans.
C
The Fed does NOT have to go through the normal congressional appropriations process because A) its expenses are very small. B) it was given enough funds at the time of its founding to provide for its expenses indefinitely. C) it is self financing. D) it is not part of the legislative branch of the federal government.
C
The facts show that the political business cycle theory A) does a good job of explaining monetary policy during presidential election years. B) is unable to explain monetary policy during presidential election years. C) does not generally hold true in the United States. D) explains monetary policy best during years in which the president is running for reelection.
C
The main argument in favor of Fed independence is that A) interest rates would probably be lower if Congress controlled the Fed, thus hurting savers. B) the Constitution requires it. C) monetary policy is too important and too technical to be determined in the political arena. D) congressional control of the Fed was tried during the 1960s and did not work well.
C
The members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as A) Class A directors. B) Class B directors. C) Class C directors. D) Class D directors.
C
The members of Federal Reserve district bank boards of directors who represent the public interest are known as A) Class A directors. B) Class B directors. C) Class C directors. D) Class D directors.
C
The principal-agent view of Fed motivation predicts that the Fed acts A) to promote the interests of the general public. B) to promote the interests of the Feds principal—the President of the United States. C) in order to increase its power, influence, and prestige. D) in order to make sure its agents—commercial banks—carry out its wishes.
C
Which groups were opposed to the Bank of the United States? A) northeastern industrial interests B) northeastern financial interests C) southern and western agrarian and small-business interests D) exporters
C
Which of the following cities does NOT contain a Federal Reserve bank? A) Cleveland B) Dallas C) Los Angeles D) Boston
C
Which of the following does NOT serve on the Governing Council of the European Central Bank? A) governors of the national central banks B) members of the executive board C) finance ministers of each country D) chair of the executive board
C
Which of the following is NOT a responsibility of the Board of Governors? A) approving bank mergers B) determining permissible activities for bank holding companies C) carrying out open market operations D) setting the salaries of the presidents and officers of district banks
C
Which of the following is NOT a role of Federal Reserve Banks? A) conduct discount lending B) serve on the FOMC C) set the interest rate on reserves D) manage check clearing in the banking system
C
Which of the following is NOT a way in which power was divided up in the Federal Reserve System? A) between bankers and business interests B) among states and regions C) between importers and exporters D) between government and the private sector
C
Which of the following statements is correct? A) Federal Reserve district banks are owned by the government. B) Member banks receive no return on the stock they own in Federal district banks. C) Federal Reserve district banks pay dividends on their earnings to member banks. D) The boards of directors of the district banks are all local bankers.
C
Which of the following statements is correct? A) The Fed has difficulty covering its normal expenses, but is reluctant to ask Congress for money. B) The Fed is dependent on the annual appropriations it receives from Congress. C) The Fed's profits are substantial, even when compared to the largest U.S. corporations. D) At one time the Fed made substantial profits, but falling interest rates have greatly reduced them.
C
Why might Congress benefit from the Fed being self-financed? A) Self-financing increases Congressional control over the Fed. B) Self-financing reduces the Feds exposure to external pressures. C) Self-financing gives the Fed an incentive to expand the money supply, which ultimately results in Congress having additional funds to spend. D) Congress does not benefit from the Fed being self-financed; Congress is obliged by the Constitution to allow the Fed to be self-financed.
C
During the financial crisis of 2007-2009, Fed Chairman Ben Bernanke relied on an informal group of three advisors to help make quick decisions on policy actions. Which of the following was NOT one of those advisors? A) Board of Governors member Donald Kohn B) New York District Bank president Timothy Geithner C) Board of Governors member Kevin Warsh D) Treasury Secretary Henry Paulson
D
Federal Reserve districts A) conform to state boundaries. B) group together economically similar states. C) have equal populations. D) cut across state and economic boundaries.
D
In 1913, Congress and the president did not envision that the Fed would control A) the money supply. B) discount loans. C) lender-of- last-resort activity. D) broad control over most aspects of money and the banking system.
D
Members of the Board of Governors A) must resign when the President who has appointed them leaves office. B) may serve no more than three consecutive four-year terms. C) serve for life or good behavior. D) serve one nonrenewable fourteen-year term.
D
The Bank of the United States faced opposition from which of the following? A) local banks who resented the Banks supervision B) advocates of limited government who distrusted its power C) farmers and small businesses who resented the Banks interference with their ability to obtain loans D) all of the above
D
The Chairman of the Federal Open Market Committee is also A) the president of the Federal Reserve Bank of New York. B) the chairman of the Securities and Exchange Commission. C) the chairman of the Federal Deposit Insurance Corporation. D) the chairman of the Board of Governors.
D
The European Central Bank is responsible for the monetary policy of A) the 5 largest European economies. B) all countries on the continent of Europe. C) all 28 countries in the European Union. D) the 19 sovereign countries that use the euro as their currency.
D
The Federal Reserve Act of 1913 A) specified both the boundaries and city locations for the district banks. B) specified the boundaries, but not the city locations, for the district banks. C) specified the city locations, but not the boundaries, for the district banks. D) specified neither the boundaries nor city locations for the district banks.
D
The issue of Fed independence is most often raised by A) disagreement over the role the Fed should play in managing monetary policy. B) the Feds refusal to carry out the wishes of the president. C) the Feds refusal to carry out the wishes of Congress. D) the public's negative reaction to Fed policy.
D
The president of which Federal Reserve Bank is always a voting member of the Federal Open Market Committee? A) Philadelphia B) Boston C) Chicago D) New York
D
The regional Federal Reserve Banks are owned by A) the federal government. B) the Federal Reserve System. C) the state governments covered by each bank's region. D) private banks which are part of the Federal Reserve System in each region.
D
Which best describes the Federal Reserve district banks? A) They are private ventures. B) They are government ventures. C) Some are private while others are government. D) They are private-government joint ventures.
D
Which country was least supportive of expansionary policy by the European Central Bank during the Financial Crisis of 2007-2009? A) Spain B) Portugal C) Greece D) Germany
D
Which of the following cities contains a Federal Reserve bank? A) Pittsburgh B) Los Angeles C) Seattle D) Dallas
D
Which of the following is the most common goal for central banks of industrialized countries? A) high employment B) high economic growth C) low interest rates D) low inflation
D
Which of the following officially ended the cooperation between the Treasury and the Fed that had taken place during World War II? A) Truman Doctrine B) Federal Reserve Act of 1951 C) Dodd-Frank Act D) Treasury-Federal Reserve Accord
D
Which of the following statements about the Depository Institutions Deregulation and Monetary Control Act of 1980 is NOT correct? A) It required all banks to maintain reserve deposits with the Fed. B) It gave member and nonmember banks equivalent access to discount loans. C) It halted the decline in Fed membership. D) It eliminated restrictions on interstate banking for member banks.
D
Which of the following statements is NOT true? A) The U.S. Constitution does not explicitly give the federal government the authority to establish a central bank. B) The U.S. Constitution states that Congress has the power & to coin money [and] regulate the value there of C) Congress delegated the power to coin money and regulate its value to the Federal Reserve in the Federal Reserve Act. D) The federal courts have never upheld the constitutionality of the Federal Reserve Act.
D
Which of the following statements is correct? A) The Fed is fully insulated from external pressures due to the long terms that members of the Board of Governors serve. B) The Fed is fully insulated from external pressures because it does not need to go through the normal congressional appropriations process. C) The Fed is fully insulated from external pressures because it has a constitutional mandate. D) The Fed is only partially insulated from external pressures.
D
