Question 1

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 FDIC 
D) All of the above 
E) Only A and B of the above 
A) The Federal Reserve banks 
B) The Board of Governors 
C) The FDIC 
D) All of the above 
E) Only A and B of the above

Question 2

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

Accepted Answer

A) resists so vigorously 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) all of the above. 
E) only A and B of the above. 
A) resists so vigorously 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) all of the above. 
E) only A and B of the above.

Question 3

Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process can

Accepted Answer

A) impart an inflationary bias to monetary policy. 
B) impart a deflationary bias to monetary policy. 
C) generate a political business cycle in which, just before an election, expansionary policies are pursued to lower unemployment and interest rates. 
D) cause both A and C of the above to occur. 
A) impart an inflationary bias to monetary policy. 
B) impart a deflationary bias to monetary policy. 
C) generate a political business cycle in which, just before an election, expansionary policies are pursued to lower unemployment and interest rates. 
D) cause both A and C of the above to occur.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Monetary policy is set by the Board of Governors.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

Which of the following banks are required to be members of the Federal Reserve System?

Accepted Answer

A) state-chartered banks 
B) insured banks 
C) banks having over $500 million in assets 
D) none of the above 
A) state-chartered banks 
B) insured banks 
C) banks having over $500 million in assets 
D) none of the above

Question 9

Countries with more independent central banks have lower inflation rates, but these have come at the expense of greater output fluctuations.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

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 13

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 14

Banks subject to reserve requirements set by the Federal Reserve System include

Accepted Answer

A) only state-chartered banks. 
B) only nationally chartered banks. 
C) only banks with less than $100 million in assets. 
D) only banks with less than $500 million in assets. 
E) all banks whether or not they are members of the Federal Reserve System. 
A) only state-chartered banks. 
B) only nationally chartered banks. 
C) only banks with less than $100 million in assets. 
D) only banks with less than $500 million in assets. 
E) all banks whether or not they are members of the Federal Reserve System.

Question 15

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 16

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 17

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 18

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 19

The Board of Governors sets reserve requirements.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 9: Central Banks and the Federal Reserve System

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

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

Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process can

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

Monetary policy is set by the Board of Governors.

The theory of bureaucratic behavior suggests that the Federal Reserve will

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

Which of the following banks are required to be members of the Federal Reserve System?

Countries with more independent central banks have lower inflation rates, but these have come at the expense of greater output fluctuations.

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

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

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

Critics of Fed independence argue

Banks subject to reserve requirements set by the Federal Reserve System include

According to the theory of bureaucratic behavior,

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

Instrument independence means the central bank is free from

All ________ are required to be members of the Fed.

The Board of Governors sets reserve requirements.

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

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

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