Question 1

When did the Federal Reserve Act become law?

Accepted Answer

A) 1836 
B) 1913 
C) 1936 
D) 1951 
A) 1836 
B) 1913 
C) 1936 
D) 1951 B

Question 2

Which of the following is NOT a way in which power was divided up in the Federal Reserve System?

Accepted Answer

A) Between bankers and business interests 
B) Among states and regions 
C) Between importers and exporters 
D) Between government and the private sector 
A) Between bankers and business interests 
B) Among states and regions 
C) Between importers and exporters 
D) Between government and the private sector C

Question 3

Most of the Fed's earnings come from

Accepted Answer

A) fees charged to financial institutions for check clearing. 
B) interest on the securities it holds. 
C) interest on discount loans. 
D) congressional appropriations. 
A) fees charged to financial institutions for check clearing. 
B) interest on the securities it holds. 
C) interest on discount loans. 
D) congressional appropriations. B

Question 4

The Humphrey-Hawkins Act

Accepted Answer

A) requires the Fed to keep the inflation rate below 4%. 
B) requires the Fed to explain how its monetary growth targets are consistent with the President's economic objectives. 
C) gives the Board of Governors a majority on the FOMC. 
D) allows the Fed to set the required reserve ratio. 
A) requires the Fed to keep the inflation rate below 4%. 
B) requires the Fed to explain how its monetary growth targets are consistent with the President's economic objectives. 
C) gives the Board of Governors a majority on the FOMC. 
D) allows the Fed to set the required reserve ratio.

Question 5

In 1913, Congress and the President did not envision that the Fed would control

Accepted Answer

A) the money supply. 
B) discount loans. 
C) lender-of-last-resort activity. 
D) monetary policy. 
A) the money supply. 
B) discount loans. 
C) lender-of-last-resort activity. 
D) monetary policy.

Question 6

Why has the Federal Reserve chairman often been called the second most important person in the nation?

Accepted Answer

A) Because the Fed chairman has veto power over all federal spending 
B) Because the Fed is in control of monetary policy 
C) Because the Fed chairman draws the second highest salary of any official of the federal government 
D) Because the Fed has regulatory power over all financial markets 
A) Because the Fed chairman has veto power over all federal spending 
B) Because the Fed is in control of monetary policy 
C) Because the Fed chairman draws the second highest salary of any official of the federal government 
D) Because the Fed has regulatory power over all financial markets

Question 7

Which groups were opposed to the Bank of the United States?

Accepted Answer

A) Northeastern industrial interests 
B) Northeastern financial interests 
C) Southern and western agrarian and small-business interests 
D) Exporters 
A) Northeastern industrial interests 
B) Northeastern financial interests 
C) Southern and western agrarian and small-business interests 
D) Exporters

Question 8

The political business cycle theory predicts that

Accepted Answer

A) the Fed acts to promote the interests of the general public. 
B) the Fed acts to stimulate economic activity before an election. 
C) the President's appointments to the Board of Governors will usually be politicians. 
D) political factors over which the Fed has no control are most important in explaining the business cycle. 
A) the Fed acts to promote the interests of the general public. 
B) the Fed acts to stimulate economic activity before an election. 
C) the President's appointments to the Board of Governors will usually be politicians. 
D) political factors over which the Fed has no control are most important in explaining the business cycle.

Question 9

Which of the following statements about the Depository Institutions Deregulation and Monetary Control Act of 1980 is NOT correct?

Accepted Answer

A) It required all banks to maintain reserve deposits with the Fed. 
B) It gave member and nonmember banks equivalent access to discount loans. 
C) It halted the decline in Fed membership. 
D) It eliminated restrictions on interstate banking for member banks. 
A) It required all banks to maintain reserve deposits with the Fed. 
B) It gave member and nonmember banks equivalent access to discount loans. 
C) It halted the decline in Fed membership. 
D) It eliminated restrictions on interstate banking for member banks.

Question 10

To conduct open market operations, the FOMC issues a directive to

Accepted Answer

A) the trading desk at the Federal Reserve Bank of New York. 
B) the Board of Governors in Washington, D.C. 
C) the presidents of the district banks. 
D) the chairman of the New York Stock Exchange. 
A) the trading desk at the Federal Reserve Bank of New York. 
B) the Board of Governors in Washington, D.C. 
C) the presidents of the district banks. 
D) the chairman of the New York Stock Exchange.

Question 11

Which of the following cities does NOT contain a Federal Reserve bank?

Accepted Answer

A) Cleveland 
B) Dallas 
C) Los Angeles 
D) Boston 
A) Cleveland 
B) Dallas 
C) Los Angeles 
D) Boston

Question 12

What percentage of all banks in the United States belong to the Federal Reserve System?

Accepted Answer

A) 5% 
B) 33% 
C) 75% 
D) 90% 
A) 5% 
B) 33% 
C) 75% 
D) 90%

Question 13

Federal Reserve banks perform all of the following roles EXCEPT

Accepted Answer

A) managing checking clearing in the payments system. 
B) performing regulatory functions. 
C) setting the federal funds rate. 
D) managing currency in circulation by issuing new Federal Reserve Notes. 
A) managing checking clearing in the payments system. 
B) performing regulatory functions. 
C) setting the federal funds rate. 
D) managing currency in circulation by issuing new Federal Reserve Notes.

Question 14

Which of the following cities contains a Federal Reserve bank?

Accepted Answer

A) Pittsburgh 
B) Los Angeles 
C) Seattle 
D) Dallas 
A) Pittsburgh 
B) Los Angeles 
C) Seattle 
D) Dallas

Question 15

Elections to the boards of directors of Federal Reserve district banks

Accepted Answer

A) have a sizeable impact on the conduct of monetary policy. 
B) typically involve only one candidate per position. 
C) have greatly increased in importance over the years. 
D) were abolished in 1985. 
A) have a sizeable impact on the conduct of monetary policy. 
B) typically involve only one candidate per position. 
C) have greatly increased in importance over the years. 
D) were abolished in 1985.

Question 16

The Fed does not have to go through the normal congressional appropriations process because

Accepted Answer

A) its expenses are very small. 
B) it was given enough funds at the time of its founding to provide for its expenses indefinitely. 
C) its net income is more than $25 billion per year. 
D) it is not part of the legislative branch of the federal government. 
A) its expenses are very small. 
B) it was given enough funds at the time of its founding to provide for its expenses indefinitely. 
C) its net income is more than $25 billion per year. 
D) it is not part of the legislative branch of the federal government.

Question 17

Who is Alan Greenspan?

Accepted Answer

A) Chair of the Federal Reserve 
B) Former chair of the Federal Reserve 
C) A recent secretary of Treasury 
D) Founder of the Federal Reserve 
A) Chair of the Federal Reserve 
B) Former chair of the Federal Reserve 
C) A recent secretary of Treasury 
D) Founder of the Federal Reserve

Question 18

Which of the following statements is correct?

Accepted Answer

A) The Fed has difficulty covering its normal expenses, but is reluctant to ask Congress for money. 
B) The Fed is dependent on the annual appropriations it receives from Congress. 
C) The Fed's profits are substantial, even when compared to the largest U.S. corporations. 
D) At one time the Fed made substantial profits, but falling interest rates have greatly reduced them. 
A) The Fed has difficulty covering its normal expenses, but is reluctant to ask Congress for money. 
B) The Fed is dependent on the annual appropriations it receives from Congress. 
C) The Fed's profits are substantial, even when compared to the largest U.S. corporations. 
D) At one time the Fed made substantial profits, but falling interest rates have greatly reduced them.

Question 19

The Banking Acts of 1933 and 1935

Accepted Answer

A) established the Federal Reserve System. 
B) increased central control of the Federal Reserve System. 
C) eliminated the authority of the Board of Governors to set reserve requirements. 
D) made the Secretary of the Treasury a member of the Board of Governors. 
A) established the Federal Reserve System. 
B) increased central control of the Federal Reserve System. 
C) eliminated the authority of the Board of Governors to set reserve requirements. 
D) made the Secretary of the Treasury a member of the Board of Governors.

Question 20

How many Federal Reserve districts are there?

Accepted Answer

A) 1 
B) 2 
C) 12 
D) 50 
A) 1 
B) 2 
C) 12 
D) 50

Exam 19: Organization of Central Banks

When did the Federal Reserve Act become law?

Which of the following is NOT a way in which power was divided up in the Federal Reserve System?

Most of the Fed's earnings come from

The Humphrey-Hawkins Act

In 1913, Congress and the President did not envision that the Fed would control

Why has the Federal Reserve chairman often been called the second most important person in the nation?

Which groups were opposed to the Bank of the United States?

The political business cycle theory predicts that

Which of the following statements about the Depository Institutions Deregulation and Monetary Control Act of 1980 is NOT correct?

To conduct open market operations, the FOMC issues a directive to

Which of the following cities does NOT contain a Federal Reserve bank?

What percentage of all banks in the United States belong to the Federal Reserve System?

Federal Reserve banks perform all of the following roles EXCEPT

Which of the following cities contains a Federal Reserve bank?

Elections to the boards of directors of Federal Reserve district banks

The Fed does not have to go through the normal congressional appropriations process because

Who is Alan Greenspan?

Which of the following statements is correct?

The Banking Acts of 1933 and 1935

How many Federal Reserve districts are there?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters