Midterm FIN 3305

Which of the following functions are not performed by any of the twelve regional Federal Reserve banks

Setting interest rates payable on time deposits

Which of the following are duties of the Board of Governors of the Federal Reserve System?

Setting margin requirements, the fraction of the purchase price of securities that has to be paid for with cash

Which of the following are not duties of the Board of Governors of the Federal Reserve System?

Setting the maximum interest rates payable on certain types of time deposits under Regulation Q.

Bank panics in 1819, 1837, 1857, 1873, 1884, 1893, and 1907 convinced many that

a central bank was needed to prevent future financial panics

The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

a central bank was needed to prevent future panics

The many regional Federal Reserve banks resulted from a compromise between parties favoring

a private central bank and those favoring a government institution

Banks subject to reserve requirements set by the Federal Reserve System include

all banks whether or not they are members of the Federal Reserve System

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

concern over declining Fed membership

All ________ are required to be members of the Fed.

nationally chartered banks

Which of the following banks are required to be members of the Federal Reserve System?

none of the above

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies

The Federal Open Market Committee consists of:

the seven members of the Board of Governors and five presidents of the regional Fed banks.

Each member of the seven-member Board of Governors is appointed by the president and confirmed by the Senate to serve

14-year term

Americans' fear of centralized power and their distrust of moneyed interests explain why the U.S. did not have a central bank until the

20th Century

Of all commercial banks, about ________ percent belong to the Federal Reserve System

33%

Although it enjoys a high degree of autonomy, the Fed is still subject to the influence of Congress because

Congress can pass legislation that would restrict the Fed's independence

The Federal Reserve entity that determines monetary policy strategy is the

Federal Open Market Committee

____________ are appointed by the president of the United States and confirmed by the Senate as members resign.

Members of the Board of Governors

1. Which Federal Reserve Bank president always has a vote in the Federal Open Market Committee?

New York

The ________ Fed bank, with about 25 percent of the system's assets, is the most important of the Federal Reserve banks

New York

− establishes, within limits, reserve requirements. − effectively sets the discount rate. -sets margin requirements

The Board of Governors

Americans' fear of centralized power, and the traditional American distrust of moneyed interests best explains

The unusual structure of the Federal Reserve System

− The FOMC usually meets every six weeks to set monetary policy. − The FOMC issues directives to the trading desk at the New York Fed. − Designers of the Federal Reserve Act did not envision the use of open market operations as a monetary policy

all the statements are true

The Federal Reserve banks and the Board of Governors

are elements of the Federal Reserve System

14-year terms for members of the Board of Governors & a four-year term for the chairman of the Board of Governors that is not coincident with the president's term of office.

are factors that provide the Federal Reserve with a high degree of independence

The FOMC meets every six weeks to set monetary policy or the FOMC issues directives to the trading desk at the New York Fed

both are true

Federal Reserve banks, Board of Governors, and the FOMC are

elements of the Federal Reserve Sysytem

Each Fed bank president attends FOMC meetings; although only ________ Fed bank presidents vote on policy, all ________ provide input

five; twelve

Federal Reserve independence is thought to

introduce longer-run considerations to monetary policymaking

The FDIC is/is not an entity of the Federal Reserve System

is not

1. Although neither ________ nor the ________ is officially set by the Federal Open Market Committee, decisions concerning these policy tools are effectively made by the committee.

reserve requirement; discount rate

Although the Federal Open Market Committee does not have formal authority to set ________ and the ________.

reserve requirement; discount rate

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited to

six percent annually

The designers of the Federal Reserve Act meant to create a central bank characterized by its

system of checks and balances and decentralization of power

Nationwide financial panics in 1873, 1884, 1893, and 1907 might have been avoided had

the Second Bank of the United States not been abolished in 1836 by President Andrew Jackson

1. The power within the Federal Reserve was effectively transferred to the Board of Governors by

the banking legislation of the Great Depression

According to the textbook authors, the Fed is

− remarkably free of the political pressures that influence other government agencies. − probably somewhat constrained in its policy-making by the congressional threat to reduce Fed independence.

The traditional American distrust of moneyed interests and the fear of centralized power help to explain

− the failures of the first two experiments in central banking in the United States. − the decentralized structure of the Federal Reserve System. -why the Board of Governors of the Federal Reserve System is not located in New York

The chairman of the Board of Governors of the Federal Reserve System exercises a high degree of control over the board

− through his ability to set the agenda of the Board and the FOMC. -through his role as spokesperson for the Fed with the President and before Congress