FIN365 CH16

The number of voting members on the Federal Open Market Committee is --------, who are the A. 7; 7 members of the board of governors B. 12; 7 members of the board of governors and 5 of the Federal Reserve Banks presidents C. 19; 7 members of the governors and the 12 Federal Reserve Banks presidents D. 12; 12 Federal Reserve Banks presidents

B. 12; 7 members of the board of governors and 5 of the Federal Reserve Banks presidents

Which of the following is responsible for invoking the Fed's emergency powers? A. FOMC B. Board of Governors C. Fed Chairman D. a majority of the Federal Reserve Bank presidents

B. Board of Governors

How many members belong to the board of directors for each of the Federal Reserve Banks? A. Seven B. Nine C. Twelve D. Fourteen

B. Nine

Which of the following is (are) not a permanent voting member(s) on the FOMC? A. The seven Governors of the Fed B. The Secretary of the Treasury C. The President of the Federal Reserve Bank of New York D. The chair of the Board of Governors

B. The Secretary of the Treasury

The objectives set for the Fed by Congress are: A. very specific; this adds to the Fed's accountability. B. by design, quite vague, allowing the Fed to really set its own goals. C. specific regarding inflation, but vague on all other goals. D. specific on the growth rate for the economy, but vague on all other objectives.

B. by design, quite vague, allowing the Fed to really set its own goals.

Each president of a Reserve Bank serves for a: A. fourteen-year term. B. five-year term. C. seven-year term. D. two-year renewable term.

B. five-year term.

In its role as bank for the U.S. government, the Federal Reserve performs all of the following services, except: A. issuing new currency. B. making discount loans. C. maintaining the U.S. Treasury's bank account. D. managing U.S. Treasury borrowings.

B. making discount loans.

One reason it took so long to have a central bank in the United States is that: A. it wasn't needed. B. states feared centralization of power. C. state currencies worked fine. D. all of the answer options are correct.

B. states feared centralization of power.

The three branches of the Federal Reserve System include each of the following, except: A. the Board of Governors. B. the Federal Deposit Insurance Corporation. C. the Federal Open Market Committee. D. the twelve regional Federal Reserve Banks.

B. the Federal Deposit Insurance Corporation.

Which of the following statements best completes the following: "The Fed's independence can only be revoked by..."? A. The U.S. President B. The Secretary of the Treasury C. Congress D. Changing the U.S. Constitution

C. Congress

The Governors of the Federal Reserve System are appointed by the: A. member banks from their home district. B. Board of Directors of the Reserve Bank from their home district. C. President of the United States. D. Chairman of the Federal Reserve System.

C. President of the United States.

Which of the books used at the FOMC meetings is/are treated as secret documents and not released to the public until after five years have passed? A. The Bluebook and the Beigebook B. The Beigebook and the Greenbook C. The Tealbook D. The Bluebook and the Greenbook

C. The Tealbook

The interest rate changes that result from the FOMC meetings: A. can be altered only by Congress. B. can be altered by the Secretary of the Treasury during an economic crisis. C. cannot be changed by anyone other than the FOMC. D. can only be altered during a time of crisis by the U.S. President.

C. cannot be changed by anyone other than the FOMC.

The Fed's revenue comes: A. from Congressional appropriation. B. from the Department of Commerce. C. from internally generated funds from interest on securities it holds and fees charged to banks for payments system services. D. solely from taxes placed on member banks.

C. from internally generated funds from interest on securities it holds and fees charged to banks for payments system services.

The Federal Reserve Bank of New York is unique from other Reserve banks because it: A. is the only regional Bank that serves just one state. B. is the only regional Bank located in a financial center. C. is where the Federal Reserve System's portfolio is managed. D. is the oldest and therefore the largest.

C. is where the Federal Reserve System's portfolio is managed.

Member banks of the Federal Reserve System include: A. only nationally chartered banks. B. all state chartered banks with assets exceeding $100 million. C. nationally chartered banks and state chartered banks that decide to join. D. nationally chartered banks and all state chartered banks.

C. nationally chartered banks and state chartered banks that decide to join.

The services the Federal Reserve provides to foreign central banks and other international organizations are handled: A. directly by the Board of Governors in Washington D.C. B. by all of the Reserve Banks. C. only by the Reserve Bank in New York. D. only by the Reserve Bank in San Francisco.

C. only by the Reserve Bank in New York.

Buying and selling U.S. Treasury Securities for the Fed's own portfolio is called: A. managing the float. B. discount buying. C. open market operations. D. reserve adjustmen

C. open market operations.

Members of the Board of Governors of the Fed: A. can be reappointed after their term expires. B. must leave office when there is a new administration elected. C. serve one non-renewable fourteen-year term. D. are appointed for life, though they can resign at any time.

C. serve one non-renewable fourteen-year term.

The Chairman of the FOMC is: A. the Secretary of the Treasury. B. the Vice-Chairman of the Board of Governors. C. the Chairman of the Board of Governors. D. the President of the New York Fed.

C. the Chairman of the Board of Governors.

The real power in the FOMC lies with: A. the President of the New York Fed Bank. B. the System Open Market Manager. C. the Chairman of the Board of Governors. D. no single individual; all participants have an equal share of the power.

C. the Chairman of the Board of Governors.

Which of the following is a false statement about the structure of the Federal Reserve System? A. Banker and business interests are reflected B. State and regional interests are reflected C. Government (public) and private interests are reflected D. Exporter and importer interests are reflected

D. Exporter and importer interests are reflected

One valuable lesson investors should learn from the stock market behavior during the late 1990s and early 2000s is that the Fed: A. can control the stock market. B. can reduce the idiosyncratic risk of investing but not the systematic risk. C. can eliminate the risk from investing. D. cannot prevent a stock market decline.

D. cannot prevent a stock market decline.

The lines drawn to establish Federal Reserve Districts were based on: A. solely population distribution in 1914. B. solely economic forces that existed in 1914. C. economic and political forces that existed in 1914. D. economic and political forces as well as population distribution in 1914.

D. economic and political forces as well as population distribution in 1914.

The policy directive that is produced from the FOMC meeting: A. details the exact amount of U.S. Treasury securities the System Open Market Account Manager is to purchase or sell. B. sets the specific discount rate for the next eight weeks. C. sets the specific range that the target interest rate can fall within. D. instructs the staff of the New York Fed on how to manage the Fed's balance sheet.

D. instructs the staff of the New York Fed on how to manage the Fed's balance sheet.

The Board of Governors of the Fed performs each of the following functions, except: A. analyzing financial and economic conditions. B. setting the reserve requirement. C. approving bank merger applications. D. making discount loans.

D. making discount loans.

Current law regarding the Fed's Board of Governors stipulates that: A. no more than three governors can come from the same district. B. no more than two governors can come from the same district. C. every district must have at least one governor on the board. D. no more than one governor can come from the same district.

D. no more than one governor can come from the same district.

The Reserve Banks of the Federal Reserve System are owned by: A. the taxpayers in their districts. B. the U.S. Treasury. C. the Board of Governors. D. the commercial banks in their districts.

D. the commercial banks in their districts.

The likelihood that the Fed will implement a change that will seriously harm the economy is minimized by the fact that: A. only bright, well-intentioned people are appointed to key roles at the Fed. B. Congress can remove the Chairman of the Fed at any time. C. the Board of Governors ultimately must answer to the U.S. President since he can replace them. D. there is decision making by committee.

D. there is decision making by committee.

The number of regional Federal Reserve Banks is: A. nine. B. seven. C. five. D. twelve.

D. twelve

The interest rate that the banks charge each other on interbank loans is known as --------- and the interest rate that the Fed charges from banks on its loans is called ------------. A. Discount rate; federal funds rate. B. Discount rate; interest rate on reserves. C. Federal funds rate; interest rate on reserves. D. Federal funds rate; discount rate.

A. Discount rate; federal funds rate.

Currently the required reserve requirements is applicable to: A. all banks, member or not. B. only member banks. C. member banks and nonmember banks over $100 million in assets. D. only nationally chartered banks.

A. all banks, member or not.

Each of the Reserve Banks has a president who is: A. appointed by the bank's board of directors but approved by the board of governors. B. appointed by the board of governors but approved by the bank's board of directors. C. elected by the commercial banks in their district. D. selected from the Board of Directors.

A. appointed by the bank's board of directors but approved by the board of governors.

The interest rate that the FOMC currently chooses to control is: A. the federal funds rate. B. the 30-year Treasury bond rate. C. the discount rate. D. the prime rate.

A. the federal funds rate.

To make sure the U.S. President cannot unduly influence the Board of Governors: A. the terms of the governors are staggered. B. the law prevents a president from appointing more than one governor. C. the terms of the governors are ten years long. D. only three governors can be replaced in any one year.

A. the terms of the governors are staggered.