Question 1

Which of the below statements is FALSE?

Accepted Answer

A)  The Fed has little regulatory power over the nation's depository institutions, especially commercial banks. 
B)  From time to time, critics charge that the Fed guards its autonomy by accommodating either the White House or Congress (or both) far too much. 
C)  Securitization permits commercial banks to change what once were illiquid consumer loans of several varieties into securities. 
D)  An important feature of the Fed is that, by the terms of the law that created it, neither the legislative nor the executive branch of the federal government should exert control over it. 
A)  The Fed has little regulatory power over the nation's depository institutions, especially commercial banks. 
B)  From time to time, critics charge that the Fed guards its autonomy by accommodating either the White House or Congress (or both) far too much. 
C)  Securitization permits commercial banks to change what once were illiquid consumer loans of several varieties into securities. 
D)  An important feature of the Fed is that, by the terms of the law that created it, neither the legislative nor the executive branch of the federal government should exert control over it.

Question 2

The creation of the money supply, and changes in it, is a complex interaction of four parties. Which of the below is NOT one of these parties?

Accepted Answer

A)  insurers 
B)  the Fed 
C)  savers 
D)  banks 
A)  insurers 
B)  the Fed 
C)  savers 
D)  banks

Question 3

The Fed has several tools by which it influences, indirectly and to a greater or lesser extent, the amount of money in the economy and the general level of interest rates. Which of the below is NOT one of these tools?

Accepted Answer

A)  reserve requirements 
B)  open market operations 
C)  open market repurchase agreements 
D)  the compound rate 
A)  reserve requirements 
B)  open market operations 
C)  open market repurchase agreements 
D)  the compound rate

Question 4

The Federal Reserve System consists of 12 districts covering the entire country; each district has a Federal Reserve Bank with its own president.

Accepted Answer

A) True 
 B)False

Question 5

Many deposit accounts pay interest, so holding cash does not impose an opportunity cost.

Accepted Answer

A) True 
 B)False

Question 6

The Fed provides reserves to banks and also requires banks to hold, as reserves, a portion of the deposits that the public holds at the banks. The banks, playing their key role in the money multiplier, lend the remainder of the deposits (or most of it) to borrowers at an interest rate that exceeds that of demand deposits. For any one bank, the remainder equals deposits less required reserves, which can be expressed as deposits times ________.

Accepted Answer

A)  (1 - $\frac { 1 } { \text { required reserv e ratio } }$ ). 
B)  (1 - required reserve ratio). 
C)  (1 × required reserve ratio). 
D)  $\frac { 1 } { \text { required reserv e ratio } }$ . 
A)  (1 - $\frac { 1 } { \text { required reserv e ratio } }$ ). 
B)  (1 - required reserve ratio). 
C)  (1 × required reserve ratio). 
D)  $\frac { 1 } { \text { required reserv e ratio } }$ .

Question 7

In the United States, the medium of exchange encompasses currency, which is issued by the Treasury or the Fed, and demand deposits, which support payment by means of checks and are held at depository institutions such as commercial banks.

Accepted Answer

A) True 
 B)False

Question 8

Other assets that do not function in the role of medium of exchange have many properties in common with the numeraire. These properties include which of the below?

Accepted Answer

A)  safety 
B)  multiplicative 
C)  low liquidity 
D)  All of these 
A)  safety 
B)  multiplicative 
C)  low liquidity 
D)  All of these

Question 9

Drains from the money creation process increase the multiplier effect of any increase in reserves.

Accepted Answer

A) True 
 B)False

Question 10

________ is developing and coordinating information sharing within the Bank, with the FSA and HM Treasury, and with authorities internationally to ensure future financial crises are handled and managed effectively.

Accepted Answer

A)  Risk Assessment 
B)  Crisis management 
C)  Risk Reduction 
D)  Oversight of Payment Systems 
A)  Risk Assessment 
B)  Crisis management 
C)  Risk Reduction 
D)  Oversight of Payment Systems

Exam 4: The U.S. Federal Reserve and the Creation of Money

Which of the below statements is FALSE?

The creation of the money supply, and changes in it, is a complex interaction of four parties. Which of the below is NOT one of these parties?

The Fed has several tools by which it influences, indirectly and to a greater or lesser extent, the amount of money in the economy and the general level of interest rates. Which of the below is NOT one of these tools?

The Federal Reserve System consists of 12 districts covering the entire country; each district has a Federal Reserve Bank with its own president.

Many deposit accounts pay interest, so holding cash does not impose an opportunity cost.

In the United States, the medium of exchange encompasses currency, which is issued by the Treasury or the Fed, and demand deposits, which support payment by means of checks and are held at depository institutions such as commercial banks.

Other assets that do not function in the role of medium of exchange have many properties in common with the numeraire. These properties include which of the below?

Drains from the money creation process increase the multiplier effect of any increase in reserves.

________ is developing and coordinating information sharing within the Bank, with the FSA and HM Treasury, and with authorities internationally to ensure future financial crises are handled and managed effectively.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Options Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters