Question 1

What are the arguments for and against an independent Fed?

Accepted Answer

The Federal Reserve is an organized body

Question 2

Which of the following central banks has the greatest degree of independence?

Accepted Answer

A)  Bank of England 
B)  European Central Bank 
C)  Bank of Japan 
D)  Federal Reserve System 
A)  Bank of England 
B)  European Central Bank 
C)  Bank of Japan 
D)  Federal Reserve System

Question 3

Which of the following is an element of the Federal Reserve System?

Accepted Answer

A)  The Federal Reserve banks 
B)  The Board of Governors 
C)  The FOMC 
D)  All of the above 
A)  The Federal Reserve banks 
B)  The Board of Governors 
C)  The FOMC 
D)  All of the above

Question 4

What is the theory of bureaucratic behavior? What types of behavior does it predict the Fed might undertake?

Accepted Answer

Bureaucracy alludes to a particular fram

Question 5

Monetary policy is set by the Board of Governors.

Accepted Answer

A) True 
 B)False

Question 6

The chairman of the Board of Governors of the Federal Reserve System exercises a high degree of control over the board

Accepted Answer

A)  through his ability to set the agenda of the Board and the FOMC. 
B)  through his role as spokesperson for the Fed with the President and before Congress. 
C)  because he can veto decisions made by a majority of the other Board members. 
D)  because of all of the above. 
E)  because of only A and B of the above. 
A)  through his ability to set the agenda of the Board and the FOMC. 
B)  through his role as spokesperson for the Fed with the President and before Congress. 
C)  because he can veto decisions made by a majority of the other Board members. 
D)  because of all of the above. 
E)  because of only A and B of the above.

Question 7

The FOMC does not actually carry out securities purchases or sales.

Accepted Answer

A) True 
 B)False

Question 8

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize

Accepted Answer

A)  the public's welfare. 
B)  its own welfare. 
C)  profits. 
D)  conflict between the executive and legislative branches of government. 
A)  the public's welfare. 
B)  its own welfare. 
C)  profits. 
D)  conflict between the executive and legislative branches of government.

Question 9

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 as members resign. 
D)  never allowed to serve more than seven-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 as members resign. 
D)  never allowed to serve more than seven-year terms.

Question 10

In the ECB,the Governing Council has the right to vote,and this right is taken very seriously,with all important matters decided by a majority vote.

Accepted Answer

A) True 
 B)False

Question 11

The case for Federal Reserve independence includes the idea that

Accepted Answer

A)  a politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level. 
B)  a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
C)  the principal-agent problem is perhaps worse for the Fed than for congressmen since the former does not answer to the voters on election day. 
D)  only A and B of the above. 
A)  a politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level. 
B)  a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
C)  the principal-agent problem is perhaps worse for the Fed than for congressmen since the former does not answer to the voters on election day. 
D)  only A and B of the above.

Question 12

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

Accepted Answer

A)  concern over declining Fed membership. 
B)  belief that all banking regulations should be eliminated. 
C)  belief that interest rate ceilings were too low. 
D)  belief that depositors had to become more knowledgeable about banking operations. 
A)  concern over declining Fed membership. 
B)  belief that all banking regulations should be eliminated. 
C)  belief that interest rate ceilings were too low. 
D)  belief that depositors had to become more knowledgeable about banking operations.

Question 13

Currently,there are ________ countries that are members of the European Monetary Union.

Accepted Answer

A)  10 
B)  17 
C)  15 
D)  20 
A)  10 
B)  17 
C)  15 
D)  20

Question 14

Which of the following are not duties of the Board of Governors of the Federal Reserve System?

Accepted Answer

A)  Setting margin requirements, the fraction of the purchase price of 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 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 15

Which of the following functions are not performed by any of the twelve regional Federal Reserve banks?

Accepted Answer

A)  Check clearing 
B)  Conducting economic research 
C)  Setting interest rates payable on time deposits 
D)  Issuing new currency 
A)  Check clearing 
B)  Conducting economic research 
C)  Setting interest rates payable on time deposits 
D)  Issuing new currency

Question 16

Announcing the FOMC's policy decision immediately after the FOMC meeting is an example of how Fed policymaking has become more transparent.

Accepted Answer

A) True 
 B)False

Question 17

The traditional American distrust of moneyed interests and the fear of centralized power help to explain

Accepted Answer

A)  the failures of the first two experiments in central banking in the United States. 
B)  the decentralized structure of the Federal Reserve System. 
C)  why the Board of Governors of the Federal Reserve System is not located in New York. 
D)  all of the above. 
E)  only A and B of the above. 
A)  the failures of the first two experiments in central banking in the United States. 
B)  the decentralized structure of the Federal Reserve System. 
C)  why the Board of Governors of the Federal Reserve System is not located in New York. 
D)  all of the above. 
E)  only A and B of the above.

Question 18

The directors of a district bank are classified into three categories: A,B,and C.The three B directors are

Accepted Answer

A)  professional bankers. 
B)  prominent leaders from industry, labor, agriculture, or the consumer sector. 
C)  elected by the board of governors to represent the public interest. 
D)  all of the above. 
A)  professional bankers. 
B)  prominent leaders from industry, labor, agriculture, or the consumer sector. 
C)  elected by the board of governors to represent the public interest. 
D)  all of the above.

Question 19

Critics of the current system of Fed independence contend that

Accepted Answer

A)  the current system is undemocratic. 
B)  voters have too much say about monetary policy. 
C)  the president has too much control over monetary policy on a day-to-day basis. 
D)  all of the above are true. 
A)  the current system is undemocratic. 
B)  voters have too much say about monetary policy. 
C)  the president has too much control over monetary policy on a day-to-day basis. 
D)  all of the above are true.

Question 20

Although neither ________ nor the ________ is officially set by the Federal Open Market Committee,decisions concerning these policy tools are effectively made by the committee.

Accepted Answer

A)  margin requirements; discount rate 
B)  margin requirements; federal funds rate 
C)  reserve requirements; discount rate 
D)  reserve requirements; federal funds rate 
A)  margin requirements; discount rate 
B)  margin requirements; federal funds rate 
C)  reserve requirements; discount rate 
D)  reserve requirements; federal funds rate

Exam 9: Central Banks and the Federal Reserve System

What are the arguments for and against an independent Fed?

Which of the following central banks has the greatest degree of independence?

Which of the following is an element of the Federal Reserve System?

What is the theory of bureaucratic behavior? What types of behavior does it predict the Fed might undertake?

Monetary policy is set by the Board of Governors.

The chairman of the Board of Governors of the Federal Reserve System exercises a high degree of control over the board

The FOMC does not actually carry out securities purchases or sales.

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize

Members of the Board of Governors are

In the ECB,the Governing Council has the right to vote,and this right is taken very seriously,with all important matters decided by a majority vote.

The case for Federal Reserve independence includes the idea that

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

Currently,there are ________ countries that are members of the European Monetary Union.

Which of the following are not duties of the Board of Governors of the Federal Reserve System?

Which of the following functions are not performed by any of the twelve regional Federal Reserve banks?

Announcing the FOMC's policy decision immediately after the FOMC meeting is an example of how Fed policymaking has become more transparent.

The traditional American distrust of moneyed interests and the fear of centralized power help to explain

The directors of a district bank are classified into three categories: A,B,and C.The three B directors are

Critics of the current system of Fed independence contend that

Although neither ________ nor the ________ is officially set by the Federal Open Market Committee,decisions concerning these policy tools are effectively made by the committee.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

Although neither nor the is officially set by the Federal Open Market Committee,decisions concerning these policy tools are effectively made by the committee.