Question 1

The Federal Open Market Committee:

Accepted Answer

A)  is made up of the presidents of the 12 Federal Reserve Banks
B)  consists of the seven members of the Board of Governors of the Fed, plus five presidents of Reserve Banks
C)  is appointed by the Chairman of the Federal Reserve System
D)  none of the above

Question 2

The National Banking Acts of 1863 and 1864 were:

Accepted Answer

A)  totally eliminated under the Federal Reserve Act of 1913
B)  were modified to permit greater flexibility of operations under the Federal Reserve Act of 1913
C)  were unaffected by the Federal Reserve Act of 1913
D)  none of the above

Question 3

Today the responsibilities of the Fed may be described as:

Accepted Answer

A)  those relating to monetary policy, to supervision and regulation, and to services provided for depository institutions and the government.
B)  those relating to fiscal policy, to supervision and regulation, and to services provided for depository institutions and the government.
C)  those relating to monetary policy, to deregulation, and to services provided for depository institutions and the government.
D)  those relating to monetary policy, to supervision and regulation, and to services provided for homeowners and the government.
E)  none of the above

Question 4

If excess reserves are near zero, then a reduction of a bank's reserves will cause the system to loosen credit.

Accepted Answer

A) True 
 B)False

Question 5

The United States was one of the earliest major-industrial nations to adopt a permanent system of central banking.

Accepted Answer

A) True 
 B)False

Question 6

Today the responsibilities of the Fed may be described as:

Accepted Answer

A)  those relating to monetary and fiscal policy, to supervision and regulation, and to services provided for depository institutions and the government.
B)  those relating to fiscal policy, to supervision and regulation, and to services provided for depository institutions and the government.
C)  those relating to monetary policy, to deregulation, and to services provided for depository institutions and the government.
D)  those relating to monetary policy, to supervision and regulation, and to services provided for homeowners and the government.
E)  none of the above

Question 7

The Federal Open Market Committee:

Accepted Answer

A)  typically buys and sells long-term corporate bonds
B)  implements the most powerful and flexible monetary policy tool of the Fed
C)  works out of Washington D.C.
D)  deals with most of the commercial banks of the nation

Question 8

Bank holding companies are supervised and examined by:

Accepted Answer

A)  the Comptroller of the Currency
B)  the FDIC
C)  the Federal Reserve
D)  internal auditors only

Question 9

History generally supports the contention that under the guidance of Paul Volcker, a (n)  ____________ Fed policy brought down the double-digit inflation of the 1970s and the early 1980s, and the Federal Open Market Committee consistently responded to his leadership.

Accepted Answer

A)  loosening of
B)  restrictive
C)  expansionary
D)  two of the above
E)  none of the above

Question 10

414033.Federal Reserve actions that stimulate or repress the level of prices or economic activity are called defensive activities.

Accepted Answer

A) True 
 B)False

Question 11

During the past several years:

Accepted Answer

A)  the discount rate has been lower than the prime rate
B)  the discount rate has been higher than the prime rate
C)  the discount rate has been unrelated to the prime rate
D)  none of the above

Question 12

The effect of an increase of required reserves by the Fed is:

Accepted Answer

A)  a decrease in loanable funds of depository institutions
B)  a decrease in interest rates
C)  usually an increase in vault cashan increase of excess reserves
D)  to stimulate activity in the home construction field

Question 13

The primary responsibility of the Fed is to formulate monetary policy which involves regulating the growth of the supply of money, and therefore regulating its cost and availability.

Accepted Answer

A) True 
 B)False

Question 14

Because of the National Banking Act, the volume of national bank notes depends on the government bond market rather than the seasonal or cyclical needs of the nation for currency.

Accepted Answer

A) True 
 B)False

Question 15

The dynamic actions of the Federal Reserve System:

Accepted Answer

A)  contribute to the smooth everyday functioning of the economy
B)  are designed to meet the credit needs of individuals and institutions
C)  support depositories and other institutions
D)  stimulate or repress the level of prices or economic activity

Question 16

Three essential needs of a well-operating financial system include all of the following EXCEPT:

Accepted Answer

A)  an efficient national payments system
B)  an elastic or flexible money supply
C)  a bank insurance system
D)  a lending/borrowing mechanism

Question 17

The Fed lending rate to depository institutions was consistently lower than the bank prime lending rate during the 19771980-1994 2009 period.

Accepted Answer

A) True 
 B)False

Question 18

Before the Federal Reserve System was created, a large part of the reserves of commercial banks was:

Accepted Answer

A)  in the form of state and federal government bonds
B)  deposited with the United States Treasury
C)  held as deposits with large city banks
D)  held as cash in their vaults

Question 19

The only bank asset that can be counted as reserve is deposits with the Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 20

The seven-member board of the Federal Reserve that sets monetary policy is called

Accepted Answer

A)  the Federal Reserve Open Market Committee
B)  the Federal Reserve Board of Governors
C)  the Federal Reserve Advisory Committee
D)  none of the above

Exam 4: Federal Reserve System

414033.Federal Reserve actions that stimulate or repress the level of prices or economic activity are called defensive activities.

Correct AnswerverifiedShow Answer

The effect of an increase of required reserves by the Fed is:

Correct AnswerverifiedShow Answer

Because of the National Banking Act, the volume of national bank notes depends on the government bond market rather than the seasonal or cyclical needs of the nation for currency.

Correct AnswerverifiedShow Answer

The Fed lending rate to depository institutions was consistently lower than the bank prime lending rate during the 19771980-1994 2009 period.

Correct AnswerverifiedShow Answer

Three essential needs of a well-operating financial system include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

The Federal Open Market Committee:

Correct AnswerverifiedShow Answer

The seven-member board of the Federal Reserve that sets monetary policy is called

Correct AnswerverifiedShow Answer

The dynamic actions of the Federal Reserve System:

Correct AnswerverifiedShow Answer

Bank holding companies are supervised and examined by:

Correct AnswerverifiedShow Answer

During the past several years:

Correct AnswerverifiedShow Answer

History generally supports the contention that under the guidance of Paul Volcker, a (n) ____________ Fed policy brought down the double-digit inflation of the 1970s and the early 1980s, and the Federal Open Market Committee consistently responded to his leadership.

Correct AnswerverifiedShow Answer

If excess reserves are near zero, then a reduction of a bank's reserves will cause the system to loosen credit.

Correct AnswerverifiedShow Answer

Before the Federal Reserve System was created, a large part of the reserves of commercial banks was:

Correct AnswerverifiedShow Answer

Today the responsibilities of the Fed may be described as:

Correct AnswerverifiedShow Answer

The primary responsibility of the Fed is to formulate monetary policy which involves regulating the growth of the supply of money, and therefore regulating its cost and availability.

Correct AnswerverifiedShow Answer

The Federal Open Market Committee:

Correct AnswerverifiedShow Answer

Today the responsibilities of the Fed may be described as:

Correct AnswerverifiedShow Answer

The only bank asset that can be counted as reserve is deposits with the Reserve Banks.

Correct AnswerverifiedShow Answer

The National Banking Acts of 1863 and 1864 were:

Correct AnswerverifiedShow Answer

The United States was one of the earliest major-industrial nations to adopt a permanent system of central banking.

Correct AnswerverifiedShow Answer

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