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Exam 12: Roles and Services of the Federal Reserve and Other Central Banks Around the World

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Question 1

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What are the Federal Reserve Banks expected to do in serving the public and the banking system?

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The Reserve banks are the government's f...

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Question 2

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What are the principal responsibilities assigned to the Board of Governors of the Federal Reserve System? To the Federal Open Market Committee?

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a. The Board of Governors of the Fed
The...

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An early goal of the Federal Reserve System was to make the U.S. money supply inelastic to changes in production and income so that it would not go through swings in magnitude.

List the principal functions of the Federal Reserve System today and explain why each of these functions is important.

Which roles of central banks are described below?

What duties are assigned to the manager of the System Open Market Account within the Federal Reserve System?

What is/are the principal target(s) of monetary policy?

What factors reduce the money-creating abilities of the banking system?

Why are deposit-type intermediaries able to create money? What factors increase the amount of deposits the banking system can create with any given injection of new reserves?

What major problems in the late nineteenth and early 20th century led to the creation of the Federal Reserve System? How did the creation of the Fed help to solve these problems?

A bank holds $130 million in the form of transaction and time and savings deposits. Its reserve deposit at the Federal Reserve bank during the current reserve maintenance period contains a daily average balance of $4 million and its vault cash holdings have averaged daily $0.40 million for several weeks running. Calculate its required reserves and excess reserves if deposits are subject to a 5 percent legal reserve requirement. Now suppose the bank elects to buy $1 million in Treasury bills from the Fed. Do you see any problem with this?

In 2006 the Federal Reserve banks collectively held securities worth over

What are the principal goals that central banks pursue as they work to carry out monetary policy?

If the Federal Reserve requires a reserve requirement, RR, equal to 10% and the bank has found an excess of $1,000,000 in reserves, then the bank could absorb an additional deposits and loans equal to

Explain why the ECB is likely to be one of the world's most important central banks.

How is the ECB similar to the Federal Reserve and in what ways is it different from the Fed?

In what important ways did the early Federal Reserve System differ from the Federal Reserve we see today?

The text identifies three principal channels of central bank policy which describe how a central bank can influence the economy.

Suppose the central bank injected $15 million in new reserves into the banking system and the current legal reserve requirement on deposits held by the banking system is 8 percent. Moreover, the banking system is perfectly efficient and there are no leakages of funds from that system except for the current legal reserve requirement. Please set up an EXCEL spreadsheet that shows how much in total required reserves and new deposits can be created in this banking system as a result of the injection of the $15 million in new legal reserves.

What functions do central banks perform in a market-oriented economy? Explain why each function you have listed is important in the functioning of a market-oriented economic system.