FINC 409 Ch. 4 T/F
All commercial banks are members of the Fed.
False
Although a central bank does not necessarily operate for profit, it generally deals directly with the public.
False
Discount policy is still a major instrument of monetary policy.
False
Empirical evidence shows that in countries where central banks are relatively independent from their governments, there has been higher inflation and lower economic growth rates than in countries where central banks are closely tied to their governments.
False
Fannie Mae was created to support the financial markets by purchasing home mortgages and automobile loans from banks so that the proceeds could be lent to other borrowers.
False
If excess reserves are near zero, then a reduction of a bank's reserves will cause the system to loosen credit.
False
Member banks of the Federal Reserve System may not borrow from the Fed.
False
Open market operations are similar to discount operations in that they increase or decrease bank reserves at the initiative of the Fed.
False
The Fed Board of Governors is composed of seven members who are appointed for a term of 12 years.
False
The Fed prefers to change reserve requirements rather than to use open market operations.
False
The Fed would be practicing contractionary monetary policy if it is caused a decrease in market interest rate.
False
The Federal Reserve Act of 1913 provided that all national and state-chartered banks were to become members of the Fed.
False
The Federal Reserve has no power to regulate the overseas activities of member banks and bank holding companies.
False
The United States was one of the earliest major-industrial nations to adopt a permanent system of central banking.
False
The ability to change the reserve requirement is powerful tool the Fed uses frequently.
False
The accommodative actions of the Fed includes buying treasury securities.
False
The minimum amount of total reserves that depository institutions must hold are called fractional reserves.
False
The only bank assets that can be counted as reserve is deposits with the Reserve Banks
False
The three primary means that the Fed can use to exercise monetary policy includes closed market operations, stabilizing reserve requirements, and freeing the Federal discount rate.
False
Federal Reserve actions that stimulate or repress the level of prices or economic activity are called defensive activities.
False.
A central bank is a Federal government agency that facilitates operation of the financial system and regulates growth of the money supply.
True
A major weakness of the banking system under the National Banking Acts was that the money supply could be easily expanded or contracted to meet changing seasonal needs and/or changes in the economic activity.
True
About one-third of the nation's commercial banks are members of the Fed.
True
Although not provided for in the original organization of the Fed, open market operations have become the most important and effective means of monetary control.
True
Banks are required by the Fed to hold reserves equal to a part of their deposits as part of the fractional reserve system of the U.S. banking system.
True
Because of the National Banking Act, the volume of national bank notes depends on the government bond market rather than the seasonal or cyclical needs of the nation for currency.
True
By exercising its influences on the monetary system of the United States, the Fed performs a unique and important function: promoting economic stability.
True
Federal Reserve actions that meet the credit needs of individuals and institutions, clearing checks, and supporting depository institutions are called accommodative activities.
True
Federal Reserve actions that stimulate or repress the level of prices or economic activity are called dynamic actions.
True
Open market operations involve the buying and selling of securities.
True
The Consumer Credit Protection Act requires that lenders clearly explain consumer credit costs and prohibit overly high-priced credit transactions.
True
The Fed discount rate is the interest rate that a bank must pay to borrow from its regional Federal Reserve bank.
True
The Fed lending rate to depository institutions was consistently lower than the bank prime lending rate during the 1980-2012 period.
True
The Fed would be practicing contractionary monetary policy if, through open market operations, it is a net seller of government securities.
True
The Federal Open Market Committee directs open market operations by buying and selling securities which are the primary instruments of exercising monetary policy.
True
The Federal Reserve Act required that ALL national banks were to become members of the Fed.
True
The Federal Reserve System (Fed), the central bank of the United States, is responsible for setting monetary policy and regulating the banking system.
True
The United States was one of the last major industrial nations to adopt a permanent system of central banking.
True
The closer to the required minimum the banking system maintains its reserves the tighter the control the Fed has over the money creation process through its other instruments.
True
The essential requirements of a well-functioning financial system include an efficient national payments system, a flexible money supply, and lending/borrowing mechanism to help alleviate liquidity problems when they arise.
True
The money supply can be contracted by holding the amount of reserves constant but raising the reserve requirement.
True
The primary responsibility of the Fed is to formulate monetary policy which involves regulating the growth of the supply of money, and therefore regulating its cost and availability.
True
The seven members of the Federal Reserve Board of Governors are responsible for the establishment of monetary policy.
True
Total deposits can be contracted by holding the amount of reserves constant but raising the reserve requirement.
True
Under the Federal Reserve Act of 1913 State-chartered banks were permitted to join the system if they could should evidence of a satisfactory financial condition.
True
When reserves are added to the banking system, depository institutions may expand their lending but are not forced to do so.
True