Question 1

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 2

The oldest central bank, founded in 1694, is the

Accepted Answer

A) Bank of England. 
B) Deutsche Bundesbank. 
C) Bank of Japan. 
D) Federal Reserve System. 
A) Bank of England. 
B) Deutsche Bundesbank. 
C) Bank of Japan. 
D) Federal Reserve System.

Question 3

Federal Reserve independence is thought to

Accepted Answer

A) introduce a short-term bias to monetary policymaking. 
B) lead to better fiscal and monetary policy coordination. 
C) introduce longer-run considerations to monetary policymaking. 
D) do both A and B of the above. 
A) introduce a short-term bias to monetary policymaking. 
B) lead to better fiscal and monetary policy coordination. 
C) introduce longer-run considerations to monetary policymaking. 
D) do both A and B of the above.

Question 4

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 5

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 6

The many regional Federal Reserve banks resulted from a compromise between parties favoring

Accepted Answer

A) the establishment of a central bank and those opposed to its establishment. 
B) a private central bank and those favoring a government institution. 
C) the establishment of the Board of Governors in Washington,D.C., and those preferring its establishment in New York City. 
D) none of the above. 
A) the establishment of a central bank and those opposed to its establishment. 
B) a private central bank and those favoring a government institution. 
C) the establishment of the Board of Governors in Washington,D.C., and those preferring its establishment in New York City. 
D) none of the above.

Question 7

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 8

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 9

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 10

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 11

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 12

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 13

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 14

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 15

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 16

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 17

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 18

The FOMC is an element of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 19

Factors that provide the Federal Reserve with a high degree of independence include

Accepted Answer

A) 14-year terms for members of the Board of Governors. 
B) a four-year term for the chairman of the Board of Governors that is not coincident with the president's term of office. 
C) constitutional independence from Congress and the president. 
D) all of the above. 
E) only A and B of the above. 
A) 14-year terms for members of the Board of Governors. 
B) a four-year term for the chairman of the Board of Governors that is not coincident with the president's term of office. 
C) constitutional independence from Congress and the president. 
D) all of the above. 
E) only A and B of the above.

Question 20

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.

Exam 9: Central Banks and the Federal Reserve System

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

The oldest central bank, founded in 1694, is the

Federal Reserve independence is thought to

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

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

The many regional Federal Reserve banks resulted from a compromise between parties favoring

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

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

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

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

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

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 case for Federal Reserve independence includes the idea that

The Board of Governors of the Federal Reserve System

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

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

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

The FOMC is an element of the Federal Reserve System.

Factors that provide the Federal Reserve with a high degree of independence include

A trend in recent years is that more and more governments

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

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