Chapter 16

The Federal Reserve was created in A) 1929. B) 1913. C) 1909. D) 1945.

B) 1913

How many members are on the Board of Governors of the Federal Reserve System? A) twelve, one for each district B) seven C) nine D) fourteen

B) Seven

The federal funds rate is the interest rate A) the Fed charges banks who borrow from it. B) banks charge each other for overnight loans on excess reserves held at the Fed. C) the U.S. Treasury charges banks that need emergency funds. D) the FDIC charges banks that need to borrow from it to meet depositor demands.

B) banks charge each other for overnight loans on excess reserves held at the Fed.

The objectives set for the Fed by Congress are A) very specific, which 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.

The FOMC controls the real interest rate A) if inflation changes quickly. B) if inflation doesn't change quickly. C) only if it adjusts the federal funds rate to match the changes in the rate of inflation. D) only on an annual basis.

B) if inflation doesn't change quickly

The Chairman of the Board of Governors A) serves a four-year term that cannot be renewed. B) is appointed by the U.S. President, selected from the Board of Governors. C) serves the same four-year term as the U.S. President. D) serves an eight-year term.

B) is appointed by the U.S. President, selected from the Board of Governors.

In its role as bank for the U.S. government, the Federal Reserve performs all of the following services except which one? 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 was not needed. B) states feared centralization of power. C) state currencies worked fine. D) the primarily agrarian economy made it difficult for financial difficulties to become widespread.

B) states feared centralization of power.

The three branches of the Federal Reserve System include each of the following, except which one? 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.

40) Which one 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 Chairman of the FOMC is the A) Secretary of the Treasury. B) Vice Chairman of the Board of Governors. C) Chairman of the Board of Governors. D) President of the New York Fed.

C) Chairman of the Board of Governors.

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 fed 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.

In its role as the bankers' bank, the Federal Reserve performs all of the following services except which one? A) collecting and making available data on business conditions B) making discount loans C) managing U.S. Treasury borrowings D) clearing paper checks and transferring funds electronically

C) managing U.S. Treasury borrowings

Considering state-chartered banks A) most elect to join the Federal Reserve System. B) those with assets exceeding $100 million must join the Federal Reserve System. C) most elect not to join the system. D) only those that join the system must abide by reserve requirements.

C) most elect not to join the system.

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 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.

The interest rate changes that result from the FOMC meetings can only be altered by A) Congress. B) the Secretary of the Treasury during an economic crisis. C) the FOMC. D) by the U.S. President during a time of crisis.

C) the FOMC.

The Federal Reserve System is composed of A) five branches with clear responsibilities. B) six branches with overlapping responsibilities. C) three branches with overlapping responsibilities. D) twelve branches with clear responsibilities.

C) three branches with overlapping responsibilities.

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

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

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

D) making discount loans

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.

Prior to 1980 A) member banks of the Federal Reserve did not have to hold non-interest-bearing reserve deposits at the Fed. B) nonmember banks had to hold non-interest-bearing reserve deposits at the Fed. C) nonmember banks did not have to hold non-interest-bearing reserve deposits at the Fed. D) all banks, member or not, had to hold non-interest-bearing reserve deposits at the Fed.

Nonmember banks did not have to hold non-interest-bearing reserve deposits at the Fed

Currently the requirement of holding a non-interest-bearing reserve account at the fed must be met by A) all banks, member or not. B) only member banks. C) member banks and nonmember banks with 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.

Each of the following is a monetary policy action conducted by any of the regional Federal Reserve banks except which action? A) conducting open market operations from their banks B) participating in FOMC meetings C) participating in setting the discount rate D) making discount loans

A) conducting open market operations from their banks

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

A) 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.