Question 1

The First Bank of the United States

Accepted Answer

A)  was disbanded in 1811 when its charter was not renewed. 
B)  had its charter renewal vetoed in 1832. 
C)  was fundamental in helping the Federal Government finance the War of 1812. 
D)  None of the above. 
A)  was disbanded in 1811 when its charter was not renewed. 
B)  had its charter renewal vetoed in 1832. 
C)  was fundamental in helping the Federal Government finance the War of 1812. 
D)  None of the above. A

Question 2

Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?

Accepted Answer

The New York district contains the largest banks in the country.The New York Fed supervises and examines these banks to insure their soundness and the safety of the nation's financial system.The New York Fed conducts open market operations and foreign exchange transactions for the Fed and Treasury.The New York Fed belongs to the Bank for International Settlements,so its president and the chairman of the Board of Governors represent the U.S.at the monthly meetings of the world's central banks.The New York Fed president is the only president of a regional Fed who is a permanent voting member of the FOMC.

Question 3

Make the case for and against an independent Federal Reserve.

Accepted Answer

Case for: 1.An independent Federal Reserve can shield the economy from the political business cycle,and it will be less likely to have an inflationary bias to monetary policy.2.Control of the money supply is too important to leave to inexperienced politicians.
Case against: 1.It is undemocratic to have monetary policy be controlled by a small number of individuals that are not accountable. 2.In the past,an independent Fed has not used its freedom wisely. 3.Its independence may encourage it to pursue its own self-interest rather than the public's interest.

Question 4

The public's fear of centralized power and distrust of moneyed interests led to the demise of the first two experiments in central banking,otherwise known as

Accepted Answer

A)  the First Bank of the United States and the Second Bank of the United States. 
B)  the First Bank of the United States and the Central Bank of the United States. 
C)  the First Central Bank of the United States and the Second Central Bank of the United States. 
D)  the First Bank of North America and the Second Bank of North America. 
A)  the First Bank of the United States and the Second Bank of the United States. 
B)  the First Bank of the United States and the Central Bank of the United States. 
C)  the First Central Bank of the United States and the Second Central Bank of the United States. 
D)  the First Bank of North America and the Second Bank of North America.

Question 5

Members of the Board of Governors are

Accepted Answer

A)  chosen by the Federal Reserve Bank presidents. 
B)  appointed by the newly elected president of the United States, as are cabinet positions. 
C)  appointed by the president of the United States and confirmed by the Senate. 
D)  never allowed to serve more than 7-year terms. 
A)  chosen by the Federal Reserve Bank presidents. 
B)  appointed by the newly elected president of the United States, as are cabinet positions. 
C)  appointed by the president of the United States and confirmed by the Senate. 
D)  never allowed to serve more than 7-year terms.

Question 6

While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy,its critics contend that its independence is

Accepted Answer

A)  limited by the Ministry of Finance's veto power over a portion of its budget. 
B)  too great because it need not pursue a policy of price stability even if that is the popular will of the people. 
C)  too great since the Ministry of Finance no longer has veto power over the bank's budget. 
D)  limited since the Ministry of Finance can dismiss senior bank officials. 
A)  limited by the Ministry of Finance's veto power over a portion of its budget. 
B)  too great because it need not pursue a policy of price stability even if that is the popular will of the people. 
C)  too great since the Ministry of Finance no longer has veto power over the bank's budget. 
D)  limited since the Ministry of Finance can dismiss senior bank officials.

Question 7

Which of the following statements about central bank structure and independence are true?

Accepted Answer

A)  In recent years, with the exception of the Bank of England and the Bank of Japan, most countries have reduced the independence of their central banks, subjecting them to greater democratic control. 
B)  Before the Bank of England was granted greater independence, the Federal Reserve was the most independent of the world's central banks. 
C)  Both theory and experience suggest that more independent central banks produce better monetary policy. 
D)  While the European Central Bank is independent, it is not as independent as the Federal Reserve. 
A)  In recent years, with the exception of the Bank of England and the Bank of Japan, most countries have reduced the independence of their central banks, subjecting them to greater democratic control. 
B)  Before the Bank of England was granted greater independence, the Federal Reserve was the most independent of the world's central banks. 
C)  Both theory and experience suggest that more independent central banks produce better monetary policy. 
D)  While the European Central Bank is independent, it is not as independent as the Federal Reserve.

Question 8

Explain two concepts of central bank independence.Is the Fed politically independent? Why do economists think central bank independence is important?

Accepted Answer

Instrument independence is the ability o

Question 9

Regarding central bank independence,

Accepted Answer

A)  the Fed is more independent than the European Central Bank. 
B)  the European Central Bank is more independent than the Fed. 
C)  the trend in industrialized nations has been to reduce central bank independence. 
D)  the Bank of England has the longest tradition of independence of any central bank in the world. 
A)  the Fed is more independent than the European Central Bank. 
B)  the European Central Bank is more independent than the Fed. 
C)  the trend in industrialized nations has been to reduce central bank independence. 
D)  the Bank of England has the longest tradition of independence of any central bank in the world.

Question 10

Recent research indicates that inflation performance (low inflation)has been found to be best in countries with

Accepted Answer

A)  the most independent central banks. 
B)  political control of monetary policy. 
C)  money financing of budget deficits. 
D)  a policy of always keeping interest rates low. 
A)  the most independent central banks. 
B)  political control of monetary policy. 
C)  money financing of budget deficits. 
D)  a policy of always keeping interest rates low.

Question 11

The ability of a central bank to set monetary policy goals is

Accepted Answer

A)  political independence. 
B)  goal independence. 
C)  policy independence. 
D)  instrument independence. 
A)  political independence. 
B)  goal independence. 
C)  policy independence. 
D)  instrument independence.

Question 12

The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

Accepted Answer

A)  the First Bank of the United States had failed to serve as a lender of last resort. 
B)  the Second Bank of the United States had failed to serve as a lender of last resort. 
C)  the Federal Reserve System had failed to serve as a lender of last resort. 
D)  a central bank was needed to prevent future panics. 
A)  the First Bank of the United States had failed to serve as a lender of last resort. 
B)  the Second Bank of the United States had failed to serve as a lender of last resort. 
C)  the Federal Reserve System had failed to serve as a lender of last resort. 
D)  a central bank was needed to prevent future panics.

Question 13

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually.

Accepted Answer

A)  four 
B)  five 
C)  six 
D)  eight 
A)  four 
B)  five 
C)  six 
D)  eight

Question 14

The trend in recent years is that more and more governments

Accepted Answer

A)  have been granting greater independence to their central banks. 
B)  have been reducing the independence of their central banks to make them more accountable for poor economic performance. 
C)  have mandated that their central banks focus on controlling inflation. 
D)  have required their central banks to cooperate more with their Ministers of Finance. 
A)  have been granting greater independence to their central banks. 
B)  have been reducing the independence of their central banks to make them more accountable for poor economic performance. 
C)  have mandated that their central banks focus on controlling inflation. 
D)  have required their central banks to cooperate more with their Ministers of Finance.

Question 15

Under the European System of Central Banks,the Governing Council is similar in structure to the ________ of the Federal Reserve System.

Accepted Answer

A)  Board of Governors 
B)  Federal Open Market Committee 
C)  Federal Reserve Banks 
D)  Federal Advisory Council 
A)  Board of Governors 
B)  Federal Open Market Committee 
C)  Federal Reserve Banks 
D)  Federal Advisory Council

Question 16

Instrument independence is the ability of ________ to set monetary policy ________.

Accepted Answer

A)  the central bank; goals 
B)  Congress; goals 
C)  Congress; instruments 
D)  the central bank; instruments 
A)  the central bank; goals 
B)  Congress; goals 
C)  Congress; instruments 
D)  the central bank; instruments

Question 17

Members of the Executive Board of the European System of Central Banks are appointed to ________ year,nonrenewable terms.

Accepted Answer

A)  four 
B)  eight 
C)  ten 
D)  fourteen 
A)  four 
B)  eight 
C)  ten 
D)  fourteen

Question 18

There are ________ members of the Board of Governors of the Federal Reserve System.

Accepted Answer

A)  5 
B)  7 
C)  12 
D)  19 
A)  5 
B)  7 
C)  12 
D)  19

Question 19

Which of the followings is not a current duty of the Board of Governors of the Federal Reserve System?

Accepted Answer

A)  Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash. 
B)  Setting the maximum interest rates payable on certain types of time deposits under Regulation Q. 
C)  Approving the discount rate "established" by the Federal Reserve banks. 
D)  Representing the United States in negotiations with foreign governments on economic matters. 
A)  Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash. 
B)  Setting the maximum interest rates payable on certain types of time deposits under Regulation Q. 
C)  Approving the discount rate "established" by the Federal Reserve banks. 
D)  Representing the United States in negotiations with foreign governments on economic matters.

Question 20

Under the European System of Central Banks,the Executive Board is similar in structure to the ________ of the Federal Reserve System.

Accepted Answer

A)  Board of Governors 
B)  Federal Open Market Committee 
C)  Federal Reserve Banks 
D)  Federal Advisory Council 
A)  Board of Governors 
B)  Federal Open Market Committee 
C)  Federal Reserve Banks 
D)  Federal Advisory Council

Exam 13: Central Banks and the Federal Reserve System

The First Bank of the United States

Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?

Make the case for and against an independent Federal Reserve.

The public's fear of centralized power and distrust of moneyed interests led to the demise of the first two experiments in central banking,otherwise known as

Members of the Board of Governors are

While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy,its critics contend that its independence is

Which of the following statements about central bank structure and independence are true?

Explain two concepts of central bank independence.Is the Fed politically independent? Why do economists think central bank independence is important?

Regarding central bank independence,

Recent research indicates that inflation performance (low inflation)has been found to be best in countries with

The ability of a central bank to set monetary policy goals is

The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually.

The trend in recent years is that more and more governments

Under the European System of Central Banks,the Governing Council is similar in structure to the ________ of the Federal Reserve System.

Instrument independence is the ability of ________ to set monetary policy ________.

Members of the Executive Board of the European System of Central Banks are appointed to ________ year,nonrenewable terms.

There are ________ members of the Board of Governors of the Federal Reserve System.

Which of the followings is not a current duty of the Board of Governors of the Federal Reserve System?

Under the European System of Central Banks,the Executive Board is similar in structure to the ________ of the Federal Reserve System.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

Instrument independence is the ability of to set monetary policy .