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

The _____________ is a network linking over 9,000 banks with the Federal Reserve that is used to transfer deposits and make loan payments between participants.

A bank has $770 million in checkable deposits. The bank has $85 million in reserves. The bank's required reserves are _____________ and its excess reserves are _____________.

The major asset of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities.

If the Fed wishes to stimulate the economy,it could I. buy U.S. government securities. II. raise the discount rate. III. lower reserve requirements.

Currently the Fed sets monetary policy by targeting

If the Fed is targeting interest rates and money demand increases,an appropriate policy response would be to

What does the 2004 Check 21 law allow? Why was this law passed? Does it benefit the customer or banks? Explain.

Federal Reserve Board members are appointed by the U.S. president and confirmed by the Senate for a nonrenewable 14-year term.

In the area of bank supervision,which of the following are functions of the Federal Reserve Banks? I. Examinations of state member banks II. Approval of member bank and bank holding company acquisitions III. Deposit insurance

The major liability of the Federal Reserve is

What are the main responsibilities of the FOMC?

Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?

The Fed wishes to expand the money supply. What three things can it do? Which has the most predictable effects? Be specific.

Explain how a change in open market operations can affect a new college graduate.

The major monetary policy-making arm of the Federal Reserve is the

Ceteris paribus,if the Fed was targeting the quantity of money supplied and money demand dropped,the Fed would likely ______________. If the Fed was instead targeting interest rates and money demand dropped,the Fed would likely _______________.

The monetary base is the amount of coin and currency in circulation plus reserves.

Suppose that oil prices hit an all-time high of $200 a barrel,driving U.S. inflation up to 7 percent per year. At the same time,weak U.S. growth and increasing foreign competition has generated unacceptably high levels of unemployment in the United States. You are the chair of the Federal Reserve. What do you suggest?

Explain how the deposit multiplier works.

Recently,oil prices have risen in the United States,generating concerns that inflation may increase. If the Fed wishes to ensure that inflation does not get out of hand,the Fed could