Question 1

Recent research indicates that inflation performance (low inflation)  has been found to be best in countries with

Accepted Answer

A)   the most independent central banks.
B)   political control of monetary policy.
C)   money financing of budget deficits.
D)   a policy of always keeping interest rates low.

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)   instruct the General Accounting Office to audit the foreign exchange market functions of the Federal Reserve.

Question 3

While the discount rate is "established" by the regional Federal Reserve Banks, in truth, the rate is determined by

Accepted Answer

A)   Congress.
B)   the president of the United States.
C)   the Senate.
D)   the Board of Governors.

Question 4

Subject to the approval of the Board of Governors, the decision of choosing the president of a district Federal Reserve Bank is made by

Accepted Answer

A)   all nine district bank directors.
B)   the six district bank directors elected by the member banks.
C)   three district bank directors who are professional bankers.
D)   district bank directors who are not professional bankers.
E)   class A and class B directors.

Question 5

Each governor on the Board of Governors can serve

Accepted Answer

A)   only one nonrenewable fourteen-year term.
B)   one full nonrenewable fourteen-year term plus part of another term.
C)   only one nonrenewable eight-year term.
D)   one full nonrenewable eight-year term plus part of another term.

Question 6

The three largest Federal Reserve banks (New York, Chicago, and San Francisco)  combined hold more than ________ percent of the assets of the Federal Reserve System.

Accepted Answer

A)   25
B)   33
C)   50
D)   67

Question 7

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

Accepted Answer

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

Question 8

Each Federal Reserve bank has nine directors. Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors.

Accepted Answer

A)   three; six
B)   four; five
C)   five; four
D)   six; three

Question 9

The research document given to the Federal Open Market Committee that contains information on the state of the economy in each Federal Reserve district is called the

Accepted Answer

A)   beige book.
B)   green book.
C)   blue book.
D)   black book.

Question 10

What makes the Federal Reserve so unique compared to other central banks around the world is its

Accepted Answer

A)   centralized structure.
B)   decentralized structure.
C)   regulatory functions.
D)   monetary policy functions.

Question 11

Members of the Executive Board of the European System of Central Banks are appointed to ________ year, nonrenewable terms.

Accepted Answer

A)   four
B)   eight
C)   ten
D)   fourteen

Question 12

Under the European System of Central Banks, the National Central Banks have the same role as the ________ of the Federal Reserve System.

Accepted Answer

A)   Board of Governors
B)   Federal Open Market Committee
C)   Federal Reserve Banks
D)   Federal Advisory Council

Question 13

Explain two concepts of central bank independence. Is the Fed politically independent? Why do economists think central bank independence is important?

Accepted Answer

Instrument independence is the ability o...

Question 14

The Governing Council usually meets ________ times a year.

Accepted Answer

A)   four
B)   six
C)   eight
D)   twelve

Question 15

The 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 focus on controlling inflation.
D)   have required their central banks to cooperate more with their Ministers of Finance.

Question 16

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

Accepted Answer

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

Question 17

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.
D)   never allowed to serve more than 7-year terms.

Question 18

Who are the voting members of the Federal Open Market Committee and why is this committee important? Where does the power lie within this committee?

Accepted Answer

The FOMC determines the monetary policy ...

Question 19

The central bank which is generally regarded as the most independent in the world because its charter cannot be changed by legislation is the

Accepted Answer

A)   Bank of England.
B)   Bank of Canada.
C)   European Central Bank.
D)   Bank of Japan.

Question 20

Which of the following functions is not performed by any of the twelve regional Federal Reserve Banks?

Accepted Answer

A)   Check clearing
B)   Conducting economic research
C)   Setting interest rates payable on time deposits
D)   Issuing new currency

Exam 16: Central Banks and the Federal Reserve System

Recent research indicates that inflation performance (low inflation) has been found to be best in countries with

Correct AnswerverifiedShow Answer

Each Federal Reserve bank has nine directors. Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors.

Correct AnswerverifiedShow Answer

Members of the Board of Governors are

Correct AnswerverifiedShow Answer

While the discount rate is "established" by the regional Federal Reserve Banks, in truth, the rate is determined by

Correct AnswerverifiedShow Answer

The research document given to the Federal Open Market Committee that contains information on the state of the economy in each Federal Reserve district is called the

Correct AnswerverifiedShow Answer

What makes the Federal Reserve so unique compared to other central banks around the world is its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Subject to the approval of the Board of Governors, the decision of choosing the president of a district Federal Reserve Bank is made by

Correct AnswerverifiedShow Answer

The central bank which is generally regarded as the most independent in the world because its charter cannot be changed by legislation is the

Correct AnswerverifiedShow Answer

Explain two concepts of central bank independence. Is the Fed politically independent? Why do economists think central bank independence is important?

Correct AnswerverifiedInstrument independence is the ability o...View AnswerShow Answer

The Governing Council usually meets ________ times a year.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The trend in recent years is that more and more governments

Correct AnswerverifiedShow Answer

Each governor on the Board of Governors can serve

Correct AnswerverifiedShow Answer

The three largest Federal Reserve banks (New York, Chicago, and San Francisco) combined hold more than ________ percent of the assets of the Federal Reserve System.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following functions is not performed by any of the twelve regional Federal Reserve Banks?

Correct AnswerverifiedShow Answer

Under the European System of Central Banks, the National Central Banks have the same role as the ________ of the Federal Reserve System.

Correct AnswerverifiedShow Answer

Members of the Executive Board of the European System of Central Banks are appointed to ________ year, nonrenewable terms.

Correct AnswerverifiedShow Answer

Who are the voting members of the Federal Open Market Committee and why is this committee important? Where does the power lie within this committee?

Correct AnswerverifiedThe FOMC determines the monetary policy ...View AnswerShow Answer

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Each Federal Reserve bank has nine directors. Of these are appointed by the member banks and are appointed by the Board of Governors.

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Instrument independence is the ability o...
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The FOMC determines the monetary policy ...
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