Question 1

About how many banks are Federal Reserve System members?

Accepted Answer

A) 500 
B) 1000 
C) 3000 
D) 4000 
A) 500 
B) 1000 
C) 3000 
D) 4000

Question 2

During the early 1980s, Paul Volcker argued that the Fed could not

Accepted Answer

A) decrease money supply growth until interest rates were higher. 
B) increase money supply growth until the Treasury's borrowing increased. 
C) decrease money supply growth until the federal budget deficit was reduced. 
D) increase money supply growth until the federal budget deficit was reduced. 
A) decrease money supply growth until interest rates were higher. 
B) increase money supply growth until the Treasury's borrowing increased. 
C) decrease money supply growth until the federal budget deficit was reduced. 
D) increase money supply growth until the federal budget deficit was reduced.

Question 3

Under the Federal Reserve Act, which banks must be members of the Federal Reserve System?

Accepted Answer

A) All commercial banks 
B) National banks 
C) State banks 
D) All banks with capital in excess of $100 million 
A) All commercial banks 
B) National banks 
C) State banks 
D) All banks with capital in excess of $100 million

Question 4

Who organized the Bank of the United States?

Accepted Answer

A) Alexander Hamilton 
B) George Washington 
C) Andrew Jackson 
D) Woodrow Wilson 
A) Alexander Hamilton 
B) George Washington 
C) Andrew Jackson 
D) Woodrow Wilson

Question 5

Member banks

Accepted Answer

A) exercise tight control over the Federal Reserve banks. 
B) are not owners of Federal Reserve banks. 
C) in practice, receive dividend payments far in excess of the 6% rate specified by law. 
D) have none of the rights typically granted to shareholders of private corporations. 
A) exercise tight control over the Federal Reserve banks. 
B) are not owners of Federal Reserve banks. 
C) in practice, receive dividend payments far in excess of the 6% rate specified by law. 
D) have none of the rights typically granted to shareholders of private corporations.

Question 6

Which of the following appears to be evidence against the public interest view of the Fed's motivation?

Accepted Answer

A) The conflict with the Treasury over interest rate fixing during World War II 
B) The failure of the Fed to emphasize the goal of price stability 
C) The unwillingness of the Fed to turn over its excess profits to the Treasury 
D) The independence of Fed chairmen from the authority of the President 
A) The conflict with the Treasury over interest rate fixing during World War II 
B) The failure of the Fed to emphasize the goal of price stability 
C) The unwillingness of the Fed to turn over its excess profits to the Treasury 
D) The independence of Fed chairmen from the authority of the President

Question 7

The national economic forecast for the next two years prepared by the staff of the Board of Governors is published in the

Accepted Answer

A) green book. 
B) beige book. 
C) blue book. 
D) Fed book. 
A) green book. 
B) beige book. 
C) blue book. 
D) Fed book.

Question 8

During World War II

Accepted Answer

A) the Board of Governors was temporarily disbanded. 
B) the Fed was not allowed to make discount loans. 
C) the Fed agreed to hold interest rates on short-term Treasury securities at low levels. 
D) the Fed agreed not to buy Treasury securities. 
A) the Board of Governors was temporarily disbanded. 
B) the Fed was not allowed to make discount loans. 
C) the Fed agreed to hold interest rates on short-term Treasury securities at low levels. 
D) the Fed agreed not to buy Treasury securities.

Question 9

In 1979, President Carter hoped to appoint a Fed chairman who would bring down inflation, thus helping President Carter to be reelected in 1980. In this respect, President Carter was

Accepted Answer

A) successful; inflation was brought down and he was reelected. 
B) unsuccessful; inflation remained high and he was defeated for reelection. 
C) partly successful; inflation was brought down but he was defeated for reelection. 
D) partly successful; inflation remained high but he was reelected. 
A) successful; inflation was brought down and he was reelected. 
B) unsuccessful; inflation remained high and he was defeated for reelection. 
C) partly successful; inflation was brought down but he was defeated for reelection. 
D) partly successful; inflation remained high but he was reelected.

Question 10

The Federal Reserve district banks

Accepted Answer

A) do not engage in monetary policy. 
B) engage in monetary policy directly through discount lending. 
C) engage in monetary policy directly through open market operations. 
D) engage in monetary policy directly through their membership on Federal Reserve committees. 
A) do not engage in monetary policy. 
B) engage in monetary policy directly through discount lending. 
C) engage in monetary policy directly through open market operations. 
D) engage in monetary policy directly through their membership on Federal Reserve committees.

Question 11

Which president failed to renew the charter of the Second Bank of the United States?

Accepted Answer

A) George Washington 
B) Andrew Jackson 
C) Franklin Roosevelt 
D) Lyndon Johnson 
A) George Washington 
B) Andrew Jackson 
C) Franklin Roosevelt 
D) Lyndon Johnson

Question 12

The reserve tax refers to

Accepted Answer

A) the tax nonmember banks must pay to the Fed on their reserves. 
B) the tax member banks must pay to the Fed on their reserves. 
C) the tax member banks must pay to the Fed on their vault cash. 
D) the interest earnings banks forgo on their reserve accounts at the Fed. 
A) the tax nonmember banks must pay to the Fed on their reserves. 
B) the tax member banks must pay to the Fed on their reserves. 
C) the tax member banks must pay to the Fed on their vault cash. 
D) the interest earnings banks forgo on their reserve accounts at the Fed.

Question 13

Which of the following is NOT considered one of the four principal groups in the Federal Reserve System?

Accepted Answer

A) Federal Reserve banks 
B) Federal Deposit Insurance Corporation 
C) Board of Governors 
D) Federal Open Market Committee 
A) Federal Reserve banks 
B) Federal Deposit Insurance Corporation 
C) Board of Governors 
D) Federal Open Market Committee

Question 14

The main argument against Fed independence is that

Accepted Answer

A) in a democracy elected officials should make public policy. 
B) monetary and fiscal policy would be easier to coordinate if the Fed were not independent. 
C) the Fed has proven irresponsible on many occasions. 
D) congressional control was tried during the 1960s and it worked well. 
A) in a democracy elected officials should make public policy. 
B) monetary and fiscal policy would be easier to coordinate if the Fed were not independent. 
C) the Fed has proven irresponsible on many occasions. 
D) congressional control was tried during the 1960s and it worked well.

Question 15

The members of Federal Reserve district bank boards of directors who represent the public interest are known as

Accepted Answer

A) Class A directors. 
B) Class B directors. 
C) Class C directors. 
D) Class D directors. 
A) Class A directors. 
B) Class B directors. 
C) Class C directors. 
D) Class D directors.

Question 16

The margin requirement set by the Federal Reserve is the

Accepted Answer

A) proportion of the purchase price of a security that an investor must pay in cash. 
B) difference between the interest rate banks may charge on loans and the interest rate they receive from deposits. 
C) same thing as the required reserve ratio on deposits. 
D) difference banks must maintain between the value of their assets and the value of their liabilities. 
A) proportion of the purchase price of a security that an investor must pay in cash. 
B) difference between the interest rate banks may charge on loans and the interest rate they receive from deposits. 
C) same thing as the required reserve ratio on deposits. 
D) difference banks must maintain between the value of their assets and the value of their liabilities.

Question 17

What is the main reason the Fed operates in a political arena?

Accepted Answer

A) It lacks a constitutional mandate. 
B) The members of the Board of Governors must run for reelection every fourteen years. 
C) The members of the Board of Governors are typically prominent politicians. 
D) It is under the direct control of Congress. 
A) It lacks a constitutional mandate. 
B) The members of the Board of Governors must run for reelection every fourteen years. 
C) The members of the Board of Governors are typically prominent politicians. 
D) It is under the direct control of Congress.

Question 18

Members of the Board of Governors

Accepted Answer

A) must resign when the President who has appointed them leaves office. 
B) may serve no more than three consecutive four-year terms. 
C) serve for life or good behavior. 
D) serve one nonrenewable fourteen-year term. 
A) must resign when the President who has appointed them leaves office. 
B) may serve no more than three consecutive four-year terms. 
C) serve for life or good behavior. 
D) serve one nonrenewable fourteen-year term.

Question 19

The members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as

Accepted Answer

A) Class A directors. 
B) Class B directors. 
C) Class C directors. 
D) Class D directors. 
A) Class A directors. 
B) Class B directors. 
C) Class C directors. 
D) Class D directors.

Question 20

House Concurrent Resolution 133

Accepted Answer

A) requires the Fed to announce targets for the growth of monetary aggregates. 
B) allows the President to appoint the chairman of the Board of Governors without congressional approval. 
C) gives the Board of Governors a majority on the FOMC. 
D) requires congressional approval of changes in the discount rate. 
A) requires the Fed to announce targets for the growth of monetary aggregates. 
B) allows the President to appoint the chairman of the Board of Governors without congressional approval. 
C) gives the Board of Governors a majority on the FOMC. 
D) requires congressional approval of changes in the discount rate.

Exam 19: Organization of Central Banks

About how many banks are Federal Reserve System members?

During the early 1980s, Paul Volcker argued that the Fed could not

Under the Federal Reserve Act, which banks must be members of the Federal Reserve System?

Who organized the Bank of the United States?

Member banks

Which of the following appears to be evidence against the public interest view of the Fed's motivation?

The national economic forecast for the next two years prepared by the staff of the Board of Governors is published in the

During World War II

In 1979, President Carter hoped to appoint a Fed chairman who would bring down inflation, thus helping President Carter to be reelected in 1980. In this respect, President Carter was

The Federal Reserve district banks

Which president failed to renew the charter of the Second Bank of the United States?

The reserve tax refers to

Which of the following is NOT considered one of the four principal groups in the Federal Reserve System?

The main argument against Fed independence is that

The members of Federal Reserve district bank boards of directors who represent the public interest are known as

The margin requirement set by the Federal Reserve is the

What is the main reason the Fed operates in a political arena?

Members of the Board of Governors

The members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as

House Concurrent Resolution 133

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