Question 1

The National Monetary Commission

Accepted Answer

A) was created by Congress to study the setting up of a central bank. 
B) authorizes open market operations. 
C) oversees nationally chartered banks. 
D) chooses Federal Reserve district bank presidents. 
A) was created by Congress to study the setting up of a central bank. 
B) authorizes open market operations. 
C) oversees nationally chartered banks. 
D) chooses Federal Reserve district bank presidents.

Question 2

The Depository Institutions Deregulation and Monetary Control Act of 1980

Accepted Answer

A) eliminated the requirement that banks hold reserve deposits with the Fed. 
B) required all state banks to join the Federal Reserve System. 
C) required all banks to maintain reserve deposits with the Fed. 
D) prohibited nonmember banks from receiving discount loans. 
A) eliminated the requirement that banks hold reserve deposits with the Fed. 
B) required all state banks to join the Federal Reserve System. 
C) required all banks to maintain reserve deposits with the Fed. 
D) prohibited nonmember banks from receiving discount loans.

Question 3

Which of the following men has NOT served as Chairman of the Board of Governors?

Accepted Answer

A) Milton Friedman 
B) Arthur Burns 
C) Paul Volcker 
D) Alan Greenspan 
A) Milton Friedman 
B) Arthur Burns 
C) Paul Volcker 
D) Alan Greenspan

Question 4

The main argument in favor of Fed independence is that

Accepted Answer

A) interest rates would probably be lower if Congress controlled the Fed; thus hurting savers. 
B) the Constitution requires it. 
C) monetary policy is too important and too technical to be determined in the political arena. 
D) congressional control of the Fed was tried during the 1960s and did not work well. 
A) interest rates would probably be lower if Congress controlled the Fed; thus hurting savers. 
B) the Constitution requires it. 
C) monetary policy is too important and too technical to be determined in the political arena. 
D) congressional control of the Fed was tried during the 1960s and did not work well.

Question 5

Generally,

Accepted Answer

A) countries with the most independent central banks have the lowest inflation rates. 
B) countries with the least independent central banks have the lowest inflation rates. 
C) countries without central banks have the lowest inflation rates. 
D) the degree of independence of a country's central banks has little to do with its inflation rate. 
A) countries with the most independent central banks have the lowest inflation rates. 
B) countries with the least independent central banks have the lowest inflation rates. 
C) countries without central banks have the lowest inflation rates. 
D) the degree of independence of a country's central banks has little to do with its inflation rate.

Question 6

Which of the following Federal Reserve district banks was NOT a major population center at the time the Fed was created?

Accepted Answer

A) New York 
B) San Francisco 
C) Richmond 
D) Chicago 
A) New York 
B) San Francisco 
C) Richmond 
D) Chicago

Question 7

Which of the following is NOT a responsibility of the Board of Governors?

Accepted Answer

A) Approving bank mergers 
B) Determining permissible activities for bank holding companies 
C) Carrying out open market operations 
D) Setting the salaries of the presidents and officers of district banks 
A) Approving bank mergers 
B) Determining permissible activities for bank holding companies 
C) Carrying out open market operations 
D) Setting the salaries of the presidents and officers of district banks

Question 8

Which of the following statements is correct?

Accepted Answer

A) The Fed is fully insulated from external pressures due to the long terms that members of the Board of Governors serve. 
B) The Fed is fully insulated from external pressures because it does not need to go through the normal congressional appropriations process. 
C) The Fed is fully insulated from external pressures because it has a constitutional mandate. 
D) The Fed is only partially insulated from external pressures. 
A) The Fed is fully insulated from external pressures due to the long terms that members of the Board of Governors serve. 
B) The Fed is fully insulated from external pressures because it does not need to go through the normal congressional appropriations process. 
C) The Fed is fully insulated from external pressures because it has a constitutional mandate. 
D) The Fed is only partially insulated from external pressures.

Question 9

Which chairman of the Board of Governors was not reappointed by President Truman in 1948 as a result of a conflict between the Fed and the Treasury?

Accepted Answer

A) Paul Volcker 
B) Marriner Eccles 
C) G. William Miller 
D) Milton Friedman 
A) Paul Volcker 
B) Marriner Eccles 
C) G. William Miller 
D) Milton Friedman

Question 10

Discuss the implications of the Fed's lacking of a constitutional mandate.

Accepted Answer

The Fed lacks a constitutional mandate a

Question 11

The members of Federal Reserve district bank boards of directors who are leaders in industry, commerce, and agriculture 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 12

Who owns the Federal Reserve banks?

Accepted Answer

A) The private commercial banks in each district which are members of the Federal Reserve System 
B) Those households which have purchased stock in Federal Reserve System 
C) The federal government 
D) The governments of the states in which the banks are located 
A) The private commercial banks in each district which are members of the Federal Reserve System 
B) Those households which have purchased stock in Federal Reserve System 
C) The federal government 
D) The governments of the states in which the banks are located

Question 13

The text states that: "Few countries have as complex a structure for their central bank as the United States has in its Federal Reserve System." Why does the Fed have such a complex structure?

Accepted Answer

The Fed was formed after a long politica

Question 14

The principal-agent view of Fed motivation predicts that the Fed acts

Accepted Answer

A) to promote the interests of the general public. 
B) to promote the interests of the Fed's principalthe President of the United States. 
C) in order to increase its power, influence, and prestige. 
D) in order to make sure its agentscommercial bankscarry out its wishes. 
A) to promote the interests of the general public. 
B) to promote the interests of the Fed's principalthe President of the United States. 
C) in order to increase its power, influence, and prestige. 
D) in order to make sure its agentscommercial bankscarry out its wishes.

Question 15

The Chairman of the Federal Open Market Committee is also

Accepted Answer

A) the president of the Federal Reserve Bank of New York. 
B) the chairman of the Securities and Exchange Commission. 
C) the chairman of the Federal Deposit Insurance Corporation. 
D) the chairman of the Board of Governors. 
A) the president of the Federal Reserve Bank of New York. 
B) the chairman of the Securities and Exchange Commission. 
C) the chairman of the Federal Deposit Insurance Corporation. 
D) the chairman of the Board of Governors.

Question 16

Which of the following statements is correct?

Accepted Answer

A) Federal Reserve district banks are owned by the government. 
B) Member banks receive no return on the stock they own in Federal district banks. 
C) Federal Reserve district banks pay dividends on their earnings to member banks. 
D) The boards of directors of the district banks are all local bankers. 
A) Federal Reserve district banks are owned by the government. 
B) Member banks receive no return on the stock they own in Federal district banks. 
C) Federal Reserve district banks pay dividends on their earnings to member banks. 
D) The boards of directors of the district banks are all local bankers.

Question 17

Who is Trichet?

Accepted Answer

A) Chairman of the Board of Governors of the Federal Reserve System 
B) Vice-Chairman of the Board of Governors of the Federal Reserve System 
C) President of the European Central Bank 
D) Secretary of the Treasury 
A) Chairman of the Board of Governors of the Federal Reserve System 
B) Vice-Chairman of the Board of Governors of the Federal Reserve System 
C) President of the European Central Bank 
D) Secretary of the Treasury

Question 18

Which of the following is NOT an activity carried out by Federal Reserve district banks?

Accepted Answer

A) Open market operations 
B) Issuing new Federal Reserve Notes 
C) Making discount loans 
D) Examining state member banks 
A) Open market operations 
B) Issuing new Federal Reserve Notes 
C) Making discount loans 
D) Examining state member banks

Question 19

What is the length of a term for the Chairman of the Board of Governors?

Accepted Answer

A) One year 
B) Four years 
C) 14 years 
D) 28 years 
A) One year 
B) Four years 
C) 14 years 
D) 28 years

Question 20

Who had served as a de facto lender of last resort during the 1907 panic?

Accepted Answer

A) The U.S. Treasury 
B) J. P. Morgan 
C) Henry Ford 
D) John D. Rockefeller 
A) The U.S. Treasury 
B) J. P. Morgan 
C) Henry Ford 
D) John D. Rockefeller

Exam 19: Organization of Central Banks

The National Monetary Commission

The Depository Institutions Deregulation and Monetary Control Act of 1980

Which of the following men has NOT served as Chairman of the Board of Governors?

The main argument in favor of Fed independence is that

Generally,

Which of the following Federal Reserve district banks was NOT a major population center at the time the Fed was created?

Which of the following is NOT a responsibility of the Board of Governors?

Which of the following statements is correct?

Which chairman of the Board of Governors was not reappointed by President Truman in 1948 as a result of a conflict between the Fed and the Treasury?

Discuss the implications of the Fed's lacking of a constitutional mandate.

The members of Federal Reserve district bank boards of directors who are leaders in industry, commerce, and agriculture are known as

Who owns the Federal Reserve banks?

The text states that: "Few countries have as complex a structure for their central bank as the United States has in its Federal Reserve System." Why does the Fed have such a complex structure?

The principal-agent view of Fed motivation predicts that the Fed acts

The Chairman of the Federal Open Market Committee is also

Which of the following statements is correct?

Who is Trichet?

Which of the following is NOT an activity carried out by Federal Reserve district banks?

What is the length of a term for the Chairman of the Board of Governors?

Who had served as a de facto lender of last resort during the 1907 panic?

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