Money and Banking Chapter 5

There are 12 district banks in the Federal Reserve. A. True B. False

A

How many districts are there in the Federal Reserve? A. 12 B. 50 C. 435 D. none of the above

A. 12

The Bank of the United States was chartered in the A. 1700s. B. 1800s. C. 1900s. D. 2000s.

A. 1700s

Janet Yellin's career before becoming Chairman of the Board of Governors of the Fed was primarily in A. academics B. business C. finance D. government

A. Academics

Why do some favor less Fed independence? A. Believe that Fed should be more accountable to the public B. Fear of Fed power C. Belief that Fed independence undercuts fiscal policy D. Concern about the profits the Fed makes

A. Believe that Fed should be more accountable to the public

Which of the following was an objective of the framers of the Federal Reserve System? A. Decentralized power B. Consolidation of the banking industry C. Elimination of private-sector influence D. Executive branch power

A. Decentralized Power

Federal law required that no two Federal Reserve Board Governors come from the same A. Federal Reserve district. B. state. C. political party. D. industry.

A. Federal Reserve District

According to Bernanke, the Fed is concerned with A. financial system stability and macroeconomic stability B. financial system stability and unemployment stability C. financial system stability only D. macroeconomic stability only

A. Financial system stability and macroeconomic stability

The Federal Reserve is considered independent because A. it has its own source of funds. B. members of the Board of Governors have lifetime terms. C. the chairman cannot be fired by the President. D. all of the above.

A. It has its own source of funds.

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to A. propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies. B. withhold appropriations from the Federal Open Market Committee. C. instruct the General Accounting Office to audit the foreign exchange market functions of the Federal Reserve. D. withhold appropriations from the Board of Governors.

A. Propose legislation that would force the fed to submit budget requests to Congress as must other government agencies.

What is the Fed's 'Dual Mandate' (twin goals)? A. stable prices and maximum employment B. zero inflation and zero unemployment C. maximum employment and minimum unemployment D. low interest rates and zero inflation

A. Stable prices and maximum employment

One of the central banks in U.S. history was killed by Andrew Jackson. A. True B. False

A. True

The ECB is more independent than the Federal Reserve. A. True B. False

A. True

The FRBNY has the job of conducting open market operations. A. True B. False

A. True

The panic of 1907 led to the chartering of the current Federal Reserve. A. True B. False

A. True

The private interest model would be supportive of central bank independence. A. True B. False

A. True

There was a period of time when the United States did not have a central bank. A. True B. False

A. True

The group that makes decisions about the conduct of monetary policy for the ECB is A. the Governing Council. B. the FOMC. C. the Executive Board. D. none of the above.

A. the Governing Council

How many members (including the chairman) are there on the Federal Reserve Board of Governors? A. 5 B. 12 C. 50 D. none of the above

B. 12

Federal Reserve Banks are owned by A. the U.S. Government B. banks that are members of the Federal reserve System C. the governments of the states in which they are located D. private share holders

B. Banks that are members of the Federal reserve System

An important function of the regional Federal Reserve Banks is A. setting reserve requirements. B. clearing checks. C. setting margin requirements. D. determining monetary policy.

B. Clearing Checks

Over the past seventy-five years, power within the Federal Reserve has shifted from A. the Federal Reserve Banks to the Board of Governors in Washington. B. domestic Federal Reserve banks to foreign Federal Reserve banks. C. the Board of Governors to the Federal Reserve Bank of New York. D. the Federal Reserve Bank of New York to the Federal Reserve Bank of Dallas.

B. Domestic Federal Reserve to foreign reserve banks

Funding for the operations of the Board of Governors of the Federal Reserve is derived from A. taxes collected from commercial banks. B. earnings of the Federal Reserve district banks. C. the governments of the states in which the district banks operate. D. appropriations from the United States Congress.

B. Earnings of the federal reserve district banks

Countries with independent central banks tend to have higher inflation. A. True B. False

B. False

The Fed cannot be audited True False

B. False

The Federal Reserve is considered to be independent since it cannot be affected by Congressional legislation. A. True B. False

B. False

The chairman of the Board of Governors has sole discretion on changes in the money supply. A. True B. False

B. False

The political business cycle refers to the phenomenon that just before elections, politicians enact _________ policies. After the elections, the bad effects of these policies (for example, ________ ) have to be counteracted with ________ policies. A. contractionary; a higher inflation rate; expansionary B. expansionary; a higher inflation rate; contractionary C. expansionary; higher unemployment; contractionary D. contractionary; higher unemployment; expansionary

B. expansionary; a higher inflation rate; contractionary

When was the current Federal Reserve first chartered? A. 1776 B. 1892 C. 1914 D. 1945

C. 1914

How many different central banks has the United States had in its history? A. 1 B. 2 C. 3 D. 4

C. 3

The Federal Open Market Committee usually meets ________ times a year. A. one B. two C. eight D. twelve

C. Eight

Supporters of Federal Reserve independence contend that independence from the rest of the federal government leads to lower A. reserve requirements. B. rates of unemployment. C. inflation rates. D. interest rates.

C. Inflation Rates

Where does the Fed get its operating income from? A. Congress B. President C. Interest on bonds D. Car washes

C. Interest on bonds

Which tool does the Fed use most commonly to control the money supply? A. changing the discount rate B. changing the reserve requirement C. open market operations D. none of the above

C. Open Market Operations

Which of the following is NOT an entity of the Federal Reserve System? A. The Board of Governors B. The Federal Open Market Committee C. The Comptroller of the Currency D. Federal Reserve Banks

C. The comptroller of the currency

Independence of a central bank refers to independence from A. foreign influence. B. the bond market. C. other parts of the government. D. all of the above.

C. other parts of the government

Which function was the Federal Reserve originally designed to perform? A. control the money supply B. clearing checks C. acting as lender of last resort D. all of the above

D. All of the above

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize A. profits. B. conflict with the executive and legislative branches of government. C. the public's welfare. D. its own welfare.

D. It's own welfare

What does the Fed do that the ECB does not? A. control interest rates B. regulate banks C. make loans D. none of the above

D. None of the Above

The Federal Reserve and the European Central Bank are exceptional among central banks due to A. their independence. B. their concern about inflation. C. their involvement in government spending decisions. D. none of the above.

D. None of the above

Each governor on the Board of Governors can serve A. one full nonrenewable eight-year term plus part of another term. B. only one nonrenewable eight-year term. C. only one nonrenewable fourteen-year term. D. one full nonrenewable fourteen-year term plus part of another term.

D. One full nonrenewable fourteen-year term plus part of another term

Which of the following are functions of a central bank? A. regulating banks B. clearing checks C. acting as lender of last resort D. all of the above

D. all of the above

Who of the following always serve on the FOMC? A. the Chairman of the Board of Governors B. the Board of Governors C. the President of the FRBNY D. all of the above

D. all of the above