Question 1

Advocates of Fed independence fear that subjecting the Fed to direct presidential or congressional control would

Accepted Answer

A) impart an inflationary bias to monetary policy. 
B) force monetary authorities to sacrifice the long-run objective of price stability. 
C) make the so-called political business cycle less pronounced. 
D) do all of the above. 
E) do only A and B of the above. 
A) impart an inflationary bias to monetary policy. 
B) force monetary authorities to sacrifice the long-run objective of price stability. 
C) make the so-called political business cycle less pronounced. 
D) do all of the above. 
E) do only A and B of the above.

Question 2

In recent years, has Fed policymaking become more or less transparent? Why?

Accepted Answer

The answer of In recent years, has Fed policymaking become...

Question 3

The 12 Federal Reserve banks are involved in monetary policy in several ways:

Accepted Answer

A) their directors establish the discount rate. 
B) they decide which banks can obtain discount loans from the Federal Reserve Bank. 
C) their directors select one commercial banker from each bank's district to serve on the Federal Advisory Council. 
D) all of the above. 
A) their directors establish the discount rate. 
B) they decide which banks can obtain discount loans from the Federal Reserve Bank. 
C) their directors select one commercial banker from each bank's district to serve on the Federal Advisory Council. 
D) all of the above.

Question 4

The theory of bureaucratic behavior suggests that the Federal Reserve will

Accepted Answer

A) try to avoid a conflict with the president and Congress over increases in interest rates. 
B) try to gain regulatory power over more banks. 
C) devise clever strategies in an effort to avoid blame for poor economic performance. 
D) do all of the above. 
A) try to avoid a conflict with the president and Congress over increases in interest rates. 
B) try to gain regulatory power over more banks. 
C) devise clever strategies in an effort to avoid blame for poor economic performance. 
D) do all of the above.

Question 5

The ________ of the Board of Governors is the spokesperson for the Fed.

Accepted Answer

A) chairman 
B) president 
C) either of the above can be the spokesperson 
D) neither of the above 
A) chairman 
B) president 
C) either of the above can be the spokesperson 
D) neither of the above

Question 6

Advocates of Fed independence fear that subjecting the Fed to direct presidential or congressional control would

Accepted Answer

A) impart an inflationary bias to monetary policy. 
B) force monetary authorities to sacrifice the long-run objective of price stability. 
C) make the so-called political business cycle even more pronounced. 
D) do all of the above. 
E) do only A and B of the above. 
A) impart an inflationary bias to monetary policy. 
B) force monetary authorities to sacrifice the long-run objective of price stability. 
C) make the so-called political business cycle even more pronounced. 
D) do all of the above. 
E) do only A and B of the above.

Question 7

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 8

A 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 give up multiple policy goals to focus strictly on inflation. 
D) have required their central banks to coordinate policies 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 give up multiple policy goals to focus strictly on inflation. 
D) have required their central banks to coordinate policies with their ministers of finance.

Question 9

Nationwide financial panics in 1873, 1884, 1893, and 1907 might have been avoided had

Accepted Answer

A) the First Bank of the United States served its intended role of lender of last resort. 
B) the Second Bank of the United States not been abolished in 1836 by President Andrew Jackson. 
C) the Second Bank of the United States served its intended role of lender of last resort. 
D) the Federal Reserve served its intended role of lender of last resort. 
A) the First Bank of the United States served its intended role of lender of last resort. 
B) the Second Bank of the United States not been abolished in 1836 by President Andrew Jackson. 
C) the Second Bank of the United States served its intended role of lender of last resort. 
D) the Federal Reserve served its intended role of lender of last resort.

Question 10

The designers of the Federal Reserve Act meant to create a central bank characterized by its

Accepted Answer

A) system of checks and balances and decentralization of power. 
B) strong concentration of power in the hands of a few people. 
C) inability to function as a lender of last resort. 
D) responsiveness to the electorate. 
A) system of checks and balances and decentralization of power. 
B) strong concentration of power in the hands of a few people. 
C) inability to function as a lender of last resort. 
D) responsiveness to the electorate.

Question 11

Which of the following are 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) Regulating credit with the approval of the President under the Credit Control Act of 1969. 
D) None of the above has been a duty of the Board since the mid-1980s. 
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) Regulating credit with the approval of the President under the Credit Control Act of 1969. 
D) None of the above has been a duty of the Board since the mid-1980s.

Question 12

Although it enjoys a high degree of autonomy, the Fed is still subject to the influence of Congress because

Accepted Answer

A) Congress can pass legislation that would restrict the Fed's independence. 
B) Congress can withhold the Fed's budget requests. 
C) Congress can remove members of the Board of Governors whose views on policy differ from those of key members of Congress. 
D) All of the above. 
A) Congress can pass legislation that would restrict the Fed's independence. 
B) Congress can withhold the Fed's budget requests. 
C) Congress can remove members of the Board of Governors whose views on policy differ from those of key members of Congress. 
D) All of the above.

Question 13

Which of the following is not an entity of the Federal Reserve System?

Accepted Answer

A) Federal Reserve banks 
B) The FDIC 
C) The Board of Governors 
D) The Federal Advisory Council 
E) Member commercial banks 
A) Federal Reserve banks 
B) The FDIC 
C) The Board of Governors 
D) The Federal Advisory Council 
E) Member commercial banks

Question 14

The newest central bank, which began operations in January 1999, is the

Accepted Answer

A) European Central Bank. 
B) Bank of Argentina. 
C) Bank of Korea. 
D) Bank of New Zealand. 
A) European Central Bank. 
B) Bank of Argentina. 
C) Bank of Korea. 
D) Bank of New Zealand.

Question 15

Instrument independence means the central bank is free from

Accepted Answer

A) political pressure regarding how it uses the tools of monetary policy. 
B) political pressure regarding the goals it pursues. 
C) both A and B of the above. 
D) neither A nor B of the above. 
A) political pressure regarding how it uses the tools of monetary policy. 
B) political pressure regarding the goals it pursues. 
C) both A and B of the above. 
D) neither A nor B of the above.

Question 16

What are the arguments for and against an independent Fed?

Accepted Answer

The answer of What are the arguments for and against...

Question 17

Which of the following are true statements?

Accepted Answer

A) The FOMC usually meets every six weeks to set monetary policy. 
B) The FOMC issues directives to the trading desk at the New York Fed. 
C) Designers of the Federal Reserve Act did not envision the use of discount lending as a monetary policy tool. 
D) All of the above are true statements. 
E) Only A and B of the above are true statements. 
A) The FOMC usually meets every six weeks to set monetary policy. 
B) The FOMC issues directives to the trading desk at the New York Fed. 
C) Designers of the Federal Reserve Act did not envision the use of discount lending as a monetary policy tool. 
D) All of the above are true statements. 
E) Only A and B of the above are true statements.

Question 18

Each member of the seven-member Board of Governors is appointed by the president and confirmed by the Senate to serve

Accepted Answer

A) 4-year terms. 
B) 6-year terms. 
C) 14-year terms. 
D) as long as the appointing president remains in office. 
A) 4-year terms. 
B) 6-year terms. 
C) 14-year terms. 
D) as long as the appointing president remains in office.

Question 19

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited to

Accepted Answer

A) four percent annually. 
B) five percent annually. 
C) six percent annually. 
D) eight percent annually. 
A) four percent annually. 
B) five percent annually. 
C) six percent annually. 
D) eight percent annually.

Question 20

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

Accepted Answer

A) 10 
B) 12 
C) 15 
D) 20 
A) 10 
B) 12 
C) 15 
D) 20

Exam 9: Central Banks and the Federal Reserve System

Advocates of Fed independence fear that subjecting the Fed to direct presidential or congressional control would

In recent years, has Fed policymaking become more or less transparent? Why?

The 12 Federal Reserve banks are involved in monetary policy in several ways:

The theory of bureaucratic behavior suggests that the Federal Reserve will

The ________ of the Board of Governors is the spokesperson for the Fed.

Advocates of Fed independence fear that subjecting the Fed to direct presidential or congressional control would

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

A trend in recent years is that more and more governments

Nationwide financial panics in 1873, 1884, 1893, and 1907 might have been avoided had

The designers of the Federal Reserve Act meant to create a central bank characterized by its

Which of the following are duties of the Board of Governors of the Federal Reserve System?

Although it enjoys a high degree of autonomy, the Fed is still subject to the influence of Congress because

Which of the following is not an entity of the Federal Reserve System?

The newest central bank, which began operations in January 1999, is the

Instrument independence means the central bank is free from

What are the arguments for and against an independent Fed?

Which of the following are true statements?

Each member of the seven-member Board of Governors is appointed by the president and confirmed by the Senate to serve

Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited to

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

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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

Filters