Question 1

The primary policy tool used by the Fed to meet its monetary policy goals is

Accepted Answer

A) changing the discount rate. 
B) changing reserve requirements. 
C) devaluing the currency. 
D) changing bank regulations. 
E) open market operations. 
A) changing the discount rate. 
B) changing reserve requirements. 
C) devaluing the currency. 
D) changing bank regulations. 
E) open market operations. E

Question 2

The major asset of the Federal Reserve is

Accepted Answer

A) U.S. Treasury securities. 
B) depository institution reserves. 
C) currency outside banks. 
D) vault cash of commercial banks. 
E) gold and foreign exchange. 
A) U.S. Treasury securities. 
B) depository institution reserves. 
C) currency outside banks. 
D) vault cash of commercial banks. 
E) gold and foreign exchange. A

Question 3

Before 2003 the discount window loan rate was set

Accepted Answer

A) below the target Fed funds rate. 
B) above the target Fed funds rate. 
C) equal to the target Fed funds rate. 
D) equal to the repurchase rate. 
A) below the target Fed funds rate. 
B) above the target Fed funds rate. 
C) equal to the target Fed funds rate. 
D) equal to the repurchase rate. A

Question 4

Nationally chartered banks are required to become members of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 5

The Fed changes reserve requirements from 10 percent to 14 percent,thereby eliminating $750 million in excess reserves. The total change in deposits (with no drains)would be (rounded)

Accepted Answer

A) $7.917 billion. 
B) $6.630 billion. 
C) $5.357 billion. 
D) $4.934 billion. 
E) none of the options. 
A) $7.917 billion. 
B) $6.630 billion. 
C) $5.357 billion. 
D) $4.934 billion. 
E) none of the options.

Question 6

From October 1983 to July 1993,the Federal Reserve targeted

Accepted Answer

A) the Fed funds rate. 
B) borrowed reserves. 
C) nonborrowed reserves. 
D) M1. 
E) M3. 
A) the Fed funds rate. 
B) borrowed reserves. 
C) nonborrowed reserves. 
D) M1. 
E) M3.

Question 7

How have recent changes in discount window credit programs affected the use of this tool for monetary policy?

Accepted Answer

In the past,the discount rate was kept b

Question 8

The seven members of the Board of Governors of the Federal Reserve System serve 14-year nonrenewable terms. Each Board member is appointed by the president and confirmed by the Senate.

Accepted Answer

A) True 
 B)False

Question 9

The Fed increases bank reserves in the system by $75 million. If there are no drains,the expected change in bank deposits is

Accepted Answer

A) $82.5 million. 
B) $945 million. 
C) $750 million. 
D) $1,500 million. 
E) $655 million. 
A) $82.5 million. 
B) $945 million. 
C) $750 million. 
D) $1,500 million. 
E) $655 million.

Question 10

Why do changes in reserve requirements have less predictable effects on the money supply in comparison to changes in open market operations?

Accepted Answer

Changing the reserve requirements change

Question 11

Bank A has an increase in deposits of $20 million dollars and all bank reserve requirements are 10 percent. Bank A loans out the full amount of the deposit increase that is allowed. This amount winds up deposited in Bank B. Bank B lends out the full amount possible as well and this amount winds up deposited in Bank C. What is the total increase in deposits resulting from these three banks?

Accepted Answer

A)  $48.00 million 
B)  $54.20 million 
C)  $56.33 million 
D)  $57.10 million 
E)  $60.00 million 
A)  $48.00 million 
B)  $54.20 million 
C)  $56.33 million 
D)  $57.10 million 
E)  $60.00 million

Question 12

The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds.

Accepted Answer

A) Fedwire 
B) ACH 
C) CHIPS 
D) NASDAQ 
E) SWIFT 
A) Fedwire 
B) ACH 
C) CHIPS 
D) NASDAQ 
E) SWIFT

Question 13

The Check 21 Act,effective in October 2004,does which of the following?

Accepted Answer

A) Allows bank customers to better take advantage of bank float 
B) Requires banks to immediately clear all customer deposits 
C) Prohibits the Fed from being involved in check clearing to prevent unfair competition with private check clearing agencies 
D) Authorizes the use of an electronic image to facilitate paperless check clearing 
E) Eliminates all fees on checking 
A) Allows bank customers to better take advantage of bank float 
B) Requires banks to immediately clear all customer deposits 
C) Prohibits the Fed from being involved in check clearing to prevent unfair competition with private check clearing agencies 
D) Authorizes the use of an electronic image to facilitate paperless check clearing 
E) Eliminates all fees on checking

Question 14

The Federal Reserve does all but which one of the following?

Accepted Answer

A) Conducts monetary policy 
B) Supervises and regulates bank activities 
C) Serves as the commercial bank for the U.S. Treasury 
D) Operates check clearing and wire transfer facilities 
E) Insures deposits 
A) Conducts monetary policy 
B) Supervises and regulates bank activities 
C) Serves as the commercial bank for the U.S. Treasury 
D) Operates check clearing and wire transfer facilities 
E) Insures deposits

Question 15

The Fed offers three types of discount window loans. ______________ credit is offered to small institutions with demonstrable patterns of financing needs,_____________ credit is offered for short-term temporary funds outflows,and _____________ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

Accepted Answer

A) Seasonal; extended; adjustment 
B) Extended; adjustment; seasonal 
C) Adjustment; extended; seasonal 
D) Seasonal; primary; secondary 
E) Adjustment; seasonal; extended 
A) Seasonal; extended; adjustment 
B) Extended; adjustment; seasonal 
C) Adjustment; extended; seasonal 
D) Seasonal; primary; secondary 
E) Adjustment; seasonal; extended

Question 16

The Federal Reserve System is charged with

Accepted Answer

A) regulating securities exchanges. 
B) conducting monetary policy. 
C) providing payment and other services to a variety of institutions. 
D) setting bank prime rates. 
E) conducting monetary policy and providing payment and other services to a variety of institutions. 
A) regulating securities exchanges. 
B) conducting monetary policy. 
C) providing payment and other services to a variety of institutions. 
D) setting bank prime rates. 
E) conducting monetary policy and providing payment and other services to a variety of institutions.

Question 17

How do Federal Reserve Banks generate income?
 Do they require supplemental funding from Congress?

Accepted Answer

*Interest earned on government securitie

Question 18

About 34 percent of all U.S. banks are members of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 19

What are the four major functions of the Federal Reserve System?

Accepted Answer

1. Conducts monetary policy
2.

Question 20

Four seats on the Federal Open Market Committee (FOMC)are allocated to Federal Reserve Bank presidents on an annual rotating basis.

Accepted Answer

A) True 
 B)False

Exam 4: The Federal Reserve System, Monetary Policy, and Interest Rates

The primary policy tool used by the Fed to meet its monetary policy goals is

The major asset of the Federal Reserve is

Before 2003 the discount window loan rate was set

Nationally chartered banks are required to become members of the Federal Reserve System.

The Fed changes reserve requirements from 10 percent to 14 percent,thereby eliminating $750 million in excess reserves. The total change in deposits (with no drains)would be (rounded)

From October 1983 to July 1993,the Federal Reserve targeted

How have recent changes in discount window credit programs affected the use of this tool for monetary policy?

The seven members of the Board of Governors of the Federal Reserve System serve 14-year nonrenewable terms. Each Board member is appointed by the president and confirmed by the Senate.

The Fed increases bank reserves in the system by $75 million. If there are no drains,the expected change in bank deposits is

Why do changes in reserve requirements have less predictable effects on the money supply in comparison to changes in open market operations?

The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds.

The Check 21 Act,effective in October 2004,does which of the following?

The Federal Reserve does all but which one of the following?

The Federal Reserve System is charged with

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress?

About 34 percent of all U.S. banks are members of the Federal Reserve System.

What are the four major functions of the Federal Reserve System?

Four seats on the Federal Open Market Committee (FOMC)are allocated to Federal Reserve Bank presidents on an annual rotating basis.

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

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