CONCEPT CHECK CH.13-01
member banks to hold some specified fraction of their deposits as reserves.
The Federal Reserve System requires:
Federal Reserve System
The ____ is the central bank and the monetary authority of the United States.
Federal Reserve
The _____ acts as the lender of last resort to commercial banks.
discount rate.
The interest rate charged by the Reserve banks to member banks that are in need of reserves is known as the:
formulate and execute the monetary policy of the country.
The primary duty of the Board of Governors of the Fed is to:
banks hold only a fraction of their deposits as cash reserves.
Banks are unable to repay cash to all depositors at the same time because:
an increase in risk-taking behavior in the banking system.
Deposit insurance led to:
b. depositors withdrawing their deposits and investing in higher-yielding alternatives.
During the 1970s, the Fed set a ceiling on interest rates that banks could pay depositors. However, a surge of inflation during this period resulted in:
of depositors who wanted to withdraw their money at the same time.
During the 19th century, the U.S. economy experienced a number of panic runs on banks because:
paying a lower interest rate to savers than they charge borrowers.
Financial intermediaries earn profit by:
bank holding companies and mergers
In recent years, banks have been able to get around restrictions on interstate branching and the type of assets that they can own through the use of _____.
government securities
Open-market operation means buying and selling of _____ by the Fed in an effort to influence money supply.
c. Holding deposits of member banks.
Which of the following is a function of the Fed? a. Buying and selling private equity. b. Extending loans to the general public. c. Holding deposits of member banks. d. Holding cash deposits of the public.
d. The Federal Open Market Committee (FOMC).
Which of the following is the name of the entity, group, or organization that has the power to conduct key monetary policies by purchasing or selling U.S. government securities? a. CEOs of large commercial banks, with nonbinding recommendations by the Fed. b. The Open Market Subcommittee of the Congress of the United States. c. The President of the United States. d. The Federal Open Market Committee (FOMC).
a. It represents a claim on a collection of short-term interest earning assets.
Which of the following is true of money market mutual fund? a. It represents a claim on a collection of short-term interest earning assets. b. It is meant for borrowers who do not have a good credit rating. c. It is compulsory for the issuer to retain at least 5% of the credit risk. d. It is a substitute for checkable deposits as it does not earn any interest.
d. High levels of employment, economic growth, and stability in prices.
Which of the following represents one or more of the key goals and objectives of the Fed? a. Promotion of low-priced foreign imports. b. Restoration of scarce and depletable natural resource stocks. c. Promotion of U.S. corporate interests overseas. d. High levels of employment, economic growth, and stability in prices.
a. The Fed failed to act as the lender of last resort.
Which of the following was one of the main causes of the failure of about one-third of the banks in the United States between 1930 and 1933? a. The Fed failed to act as the lender of last resort. b. The Fed failed to maintain a high rate of interest. c. The Fed failed to relax its minimum reserve policy. d. The Fed failed to print an adequate amount of currency notes.
Reserves
_____ are funds that banks have on hand or on deposit with the Fed to satisfy the cash demands of their customers.
Deposit insurance
_____, originally introduced during the Great Depression to prevent bank panics, caused depositors to become complacent about the safety of their deposits.