Question 1

The case for Federal Reserve independence does not include the idea that

Accepted Answer

A) political pressure would impart an inflationary bias to monetary policy. 
B) 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. 
C) policy is always performed better by an elite group such as the Fed. 
D) a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
A) political pressure would impart an inflationary bias to monetary policy. 
B) 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. 
C) policy is always performed better by an elite group such as the Fed. 
D) a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced.

Question 2

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 3

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

Accepted Answer

A) withhold appropriations from the Board of Governors. 
B) withhold appropriations from the Federal Open Market Committee. 
C) propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies. 
D) do all of the above. 
A) withhold appropriations from the Board of Governors. 
B) withhold appropriations from the Federal Open Market Committee. 
C) propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies. 
D) do all of the above.

Question 4

Critics of Fed independence argue

Accepted Answer

A) that it is undemocratic to have monetary policy controlled by an elite group responsible to no one. 
B) that an independent Fed conducts monetary policy with a consistent inflationary bias. 
C) that the Fed, since it does not face a binding budget constraint, spends too much of its earnings. 
D) only A and B of the above. 
A) that it is undemocratic to have monetary policy controlled by an elite group responsible to no one. 
B) that an independent Fed conducts monetary policy with a consistent inflationary bias. 
C) that the Fed, since it does not face a binding budget constraint, spends too much of its earnings. 
D) only A and B of the above.

Question 5

Although the Federal Open Market Committee does not have formal authority to set ________ and the ________, it does possess the authority in practice.

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

Question 6

Cross-country evidence suggests that an increase in central bank independence results in a ________ inflation rate and ________ unemployment.

Accepted Answer

A) lower; higher 
B) lower; no worse 
C) higher; lower 
D) higher; higher 
A) lower; higher 
B) lower; no worse 
C) higher; lower 
D) higher; higher

Question 7

All ________ are required to be members of the Fed.

Accepted Answer

A) state-chartered banks 
B) nationally chartered banks 
C) banks with more than $100 million in assets 
D) banks with more than $500 million in assets 
A) state-chartered banks 
B) nationally chartered banks 
C) banks with more than $100 million in assets 
D) banks with more than $500 million in assets

Question 8

The FOMC issues directives to the trading desk at the New York Fed.

Accepted Answer

A) True 
 B)False

Question 9

The case for Federal Reserve independence does not include the idea that

Accepted Answer

A) political pressure would impart an inflationary bias to monetary policy. 
B) 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. 
C) 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. 
D) a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
A) political pressure would impart an inflationary bias to monetary policy. 
B) 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. 
C) 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. 
D) a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced.

Question 10

Supporters of the current system of Fed independence believe that a less autonomous Fed would

Accepted Answer

A) adopt a long-run bias toward policymaking. 
B) pursue overly expansionary monetary policies. 
C) be more likely to create a political business cycle. 
D) do only B and C of the above. 
A) adopt a long-run bias toward policymaking. 
B) pursue overly expansionary monetary policies. 
C) be more likely to create a political business cycle. 
D) do only B and C of the above.

Question 11

The three largest Federal Reserve banks in terms of assets are those of New York, Chicago, and

Accepted Answer

A) Atlanta. 
B) Los Angeles. 
C) Baltimore. 
D) San Francisco. 
A) Atlanta. 
B) Los Angeles. 
C) Baltimore. 
D) San Francisco.

Question 12

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 13

According to the theory of bureaucratic behavior,

Accepted Answer

A) the objective of a bureaucracy is to maximize its own welfare, meaning that it seeks additional power and prestige. 
B) the bureaucracy will fight vigorously to preserve its autonomy; thus, it will attempt to avoid conflict with the president and Congress. 
C) the bureaucracy will support legislation that gives it additional regulatory power. 
D) all of the above describe bureaucratic behavior. 
A) the objective of a bureaucracy is to maximize its own welfare, meaning that it seeks additional power and prestige. 
B) the bureaucracy will fight vigorously to preserve its autonomy; thus, it will attempt to avoid conflict with the president and Congress. 
C) the bureaucracy will support legislation that gives it additional regulatory power. 
D) all of the above describe bureaucratic behavior.

Question 14

What are the factors that promote the independence of the Federal Reserve?

Accepted Answer

The answer of What are the factors that promote the...

Question 15

The unusual structure of the Federal Reserve System is best explained by Americans' fear of centralized power.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Discuss similarities and differences between Ben Bernanke and Alan Greenspan in their respective roles as chairman of the Federal Reserve Board.

Accepted Answer

The answer of Discuss similarities and differences between Ben Bernanke...

Question 18

The Board of Governors of the Federal Reserve System

Accepted Answer

A) appoint three directors to each Federal Reserve Bank. 
B) elect six members to member commercial banks. 
C) both of the above. 
D) none of the above. 
A) appoint three directors to each Federal Reserve Bank. 
B) elect six members to member commercial banks. 
C) both of the above. 
D) none of the above.

Question 19

Each member of the seven-member Board is appointed by the president and confirmed by the Senate to serve 14-year terms.

Accepted Answer

A) True 
 B)False

Question 20

The power within the Federal Reserve was effectively transferred to the Board of Governors by

Accepted Answer

A) the banking legislation of the Great Depression. 
B) Supreme Court decisions in the 1950s. 
C) the Depository Institutions Deregulation and Monetary Control Act of 1980. 
D) the Treasury-Federal Reserve Accord of 1951. 
A) the banking legislation of the Great Depression. 
B) Supreme Court decisions in the 1950s. 
C) the Depository Institutions Deregulation and Monetary Control Act of 1980. 
D) the Treasury-Federal Reserve Accord of 1951.

Exam 9: Central Banks and the Federal Reserve System

The case for Federal Reserve independence does not include the idea that

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

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

Critics of Fed independence argue

Although the Federal Open Market Committee does not have formal authority to set ________ and the ________, it does possess the authority in practice.

Cross-country evidence suggests that an increase in central bank independence results in a ________ inflation rate and ________ unemployment.

All ________ are required to be members of the Fed.

The FOMC issues directives to the trading desk at the New York Fed.

The case for Federal Reserve independence does not include the idea that

Supporters of the current system of Fed independence believe that a less autonomous Fed would

The three largest Federal Reserve banks in terms of assets are those of New York, Chicago, and

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

According to the theory of bureaucratic behavior,

What are the factors that promote the independence of the Federal Reserve?

The unusual structure of the Federal Reserve System is best explained by Americans' fear of centralized power.

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

Discuss similarities and differences between Ben Bernanke and Alan Greenspan in their respective roles as chairman of the Federal Reserve Board.

The Board of Governors of the Federal Reserve System

Each member of the seven-member Board is appointed by the president and confirmed by the Senate to serve 14-year terms.

The power within the Federal Reserve was effectively transferred to the Board of Governors by

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

Although the Federal Open Market Committee does not have formal authority to set and the , it does possess the authority in practice.

Cross-country evidence suggests that an increase in central bank independence results in a inflation rate and unemployment.