Question 1

Each Fed bank president attends FOMC meetings; although only ________ Fed bank presidents vote on policy, all ________ provide input.

Accepted Answer

A) three; ten 
B) five; ten 
C) three; twelve 
D) five; twelve 
A) three; ten 
B) five; ten 
C) three; twelve 
D) five; twelve

Question 2

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 3

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

Accepted Answer

The answer of What is the theory of bureaucratic behavior?...

Question 4

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

Question 5

The Federal Advisory Council has ________ member(s)from each district.

Accepted Answer

A) one 
B) two 
C) three 
D) can have any number of 
A) one 
B) two 
C) three 
D) can have any number of

Question 6

Former Congressman Jack Kemp reportedly once said that he wanted to become the most powerful man in Washington, D.C.the chairman of the Board of Governors of the Federal Reserve System. What does Representative Kemp's comment imply about the power of the chairman of the Federal Reserve? Do you think he may have been exaggerating? Explain.

Accepted Answer

The answer of Former Congressman Jack Kemp reportedly once said...

Question 7

All nationally chartered banks are required to be members of the Fed.

Accepted Answer

A) True 
 B)False

Question 8

Former Board of Governors chairman Paul Volcker reportedly once said that the Federal Reserve is free to pursue any policy it desires, as long as it convinces Congress that such a policy is reasonable. What does Volcker's comment suggest about the independence of the Fed? Explain.

Accepted Answer

The answer of Former Board of Governors chairman Paul Volcker...

Question 9

The Federal Open Market Committee consists of

Accepted Answer

A) the five senior members of the seven-member Board of Governors. 
B) the seven members of the Board of Governors and seven presidents of the regional Fed banks. 
C) the seven members of the Board of Governors and five presidents of the regional Fed banks. 
D) the twelve regional Fed bank presidents and the chairman of the Board of Governors. 
A) the five senior members of the seven-member Board of Governors. 
B) the seven members of the Board of Governors and seven presidents of the regional Fed banks. 
C) the seven members of the Board of Governors and five presidents of the regional Fed banks. 
D) the twelve regional Fed bank presidents and the chairman of the Board of Governors.

Question 10

Americans' fear of centralized power and their distrust of moneyed interests explain why the U.S. did not have a central bank until the

Accepted Answer

A) 17th century. 
B) 18th century. 
C) 19th century. 
D) 20th century. 
A) 17th century. 
B) 18th century. 
C) 19th century. 
D) 20th century.

Question 11

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 independence seemingly does little to guarantee good monetary policy. 
C) that its independence may encourage the Fed to pursue a course of narrow self-interest rather than the public interest. 
D) all of the above. 
A) that it is undemocratic to have monetary policy controlled by an elite group responsible to no one. 
B) that independence seemingly does little to guarantee good monetary policy. 
C) that its independence may encourage the Fed to pursue a course of narrow self-interest rather than the public interest. 
D) all of the above.

Question 12

Of all commercial banks, about ________ percent belong to the Federal Reserve System.

Accepted Answer

A) 15 
B) 20 
C) 30 
D) 50 
A) 15 
B) 20 
C) 30 
D) 50

Question 13

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 open market operations 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 open market operations 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 14

In November 2007, the Fed announced major enhancements to its communication strategy. Which of the following was a part of the changes?

Accepted Answer

A) The forecast horizon for the FOMC's projections was extended from two calendar years to three. 
B) The committee publishes FOMC projections four times a year instead of twice a year. 
C) The release would include a narrative of the forces shaping the outlook and risks to that outlook. 
D) All of the above were proposed changes. 
A) The forecast horizon for the FOMC's projections was extended from two calendar years to three. 
B) The committee publishes FOMC projections four times a year instead of twice a year. 
C) The release would include a narrative of the forces shaping the outlook and risks to that outlook. 
D) All of the above were proposed changes.

Question 15

According to the textbook authors,

Accepted Answer

A) the Fed appears to be remarkably free of the political pressures that influence other government agencies. 
B) since the president can protect the Fed from Congress, the Fed may be responsive to the president's policy preferences. 
C) the Fed appears to be more responsive to the political pressures that influence other government agencies. 
D) both A and B of the above. 
E) both B and C of the above. 
A) the Fed appears to be remarkably free of the political pressures that influence other government agencies. 
B) since the president can protect the Fed from Congress, the Fed may be responsive to the president's policy preferences. 
C) the Fed appears to be more responsive to the political pressures that influence other government agencies. 
D) both A and B of the above. 
E) both B and C of the above.

Question 16

The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed

Accepted Answer

A) is supportive of congressional attempts to limit the central bank's autonomy. 
B) is secretive about the conduct of future monetary policy. 
C) sought less control over banks in the 1980s. 
D) is willing to take on powerful groups that may threaten its autonomy. 
A) is supportive of congressional attempts to limit the central bank's autonomy. 
B) is secretive about the conduct of future monetary policy. 
C) sought less control over banks in the 1980s. 
D) is willing to take on powerful groups that may threaten its autonomy.

Question 17

The ________ Fed bank, with about 25 percent of the system's assets, is the most important of the Federal Reserve banks.

Accepted Answer

A) Chicago 
B) Los Angeles 
C) Miami 
D) New York 
E) Washington, D.C. 
A) Chicago 
B) Los Angeles 
C) Miami 
D) New York 
E) Washington, D.C.

Question 18

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

Exam 9: Central Banks and the Federal Reserve System

Each Fed bank president attends FOMC meetings; although only ________ Fed bank presidents vote on policy, all ________ provide input.

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?

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

The Federal Advisory Council has ________ member(s)from each district.

All nationally chartered banks are required to be members of the Fed.

Former Board of Governors chairman Paul Volcker reportedly once said that the Federal Reserve is free to pursue any policy it desires, as long as it convinces Congress that such a policy is reasonable. What does Volcker's comment suggest about the independence of the Fed? Explain.

The Federal Open Market Committee consists of

Americans' fear of centralized power and their distrust of moneyed interests explain why the U.S. did not have a central bank until the

Critics of Fed independence argue

Of all commercial banks, about ________ percent belong to the Federal Reserve System.

Which of the following are true statements?

In November 2007, the Fed announced major enhancements to its communication strategy. Which of the following was a part of the changes?

According to the textbook authors,

The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed

The ________ Fed bank, with about 25 percent of the system's assets, is the most important of the 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.

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

Each Fed bank president attends FOMC meetings; although only Fed bank presidents vote on policy, all provide input.

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