Question 1

What are the arguments for and against an independent Fed?

Accepted Answer

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

Question 2

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 3

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 4

What factors limit the independence of the Federal Reserve?

Accepted Answer

The answer of What factors limit the independence of the...

Question 5

Critics of the current system of Fed independence contend that

Accepted Answer

A) the current system is undemocratic. 
B) voters have too much say about monetary policy. 
C) the president has too much control over monetary policy on a day-to-day basis. 
D) all of the above are true. 
A) the current system is undemocratic. 
B) voters have too much say about monetary policy. 
C) the president has too much control over monetary policy on a day-to-day basis. 
D) all of the above are true.

Question 6

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 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

Members of the Board of Governors are

Accepted Answer

A) chosen by the Federal Reserve Bank presidents. 
B) appointed by the newly elected president of the United States, as are cabinet positions. 
C) appointed by the president of the United States and confirmed by the Senate as members resign. 
D) never allowed to serve more than seven-year terms. 
A) chosen by the Federal Reserve Bank presidents. 
B) appointed by the newly elected president of the United States, as are cabinet positions. 
C) appointed by the president of the United States and confirmed by the Senate as members resign. 
D) never allowed to serve more than seven-year terms.

Question 9

The case for Federal Reserve independence includes 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) a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
D) all of the above. 
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) a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced. 
D) all of the above.

Question 10

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 11

The Fed has goal independence but not instrument independence.

Accepted Answer

A) True 
 B)False

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

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 14

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 15

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

Question 16

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

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Exam 9: Central Banks and the Federal Reserve System

What are the arguments for and against an independent Fed?

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

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

What factors limit the independence of the Federal Reserve?

Critics of the current system of Fed independence contend that

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

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

Members of the Board of Governors are

The case for Federal Reserve independence includes the idea that

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

The Fed has goal independence but not instrument independence.

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

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

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

Announcing the FOMC's policy decision immediately after the FOMC meeting is an example of how Fed policymaking has become more transparent.

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

Critics of Fed independence argue

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

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.