Ch04 - Chapter 4 The Federal Reserve System, Monetary...

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Chapter 4 The Federal Reserve System, Monetary Policy, and Interest Rates True/False Questions 1. Federal Reserve interest rate decisions can be vetoed by the U.S. President or the Congress. Answer: False Page: 90 Level: Easy 2. The FOMC is responsible for supervising and regulating depository institutions and foreign exchange traders. Answer: False Page: 93 Level: Easy 3. Four seats on the FOMC are allocated to Federal Reserve Bank presidents on an annual rotating basis. Answer: True Page: 93 Level: Easy 4. The monetary base is the amount of coin and currency in circulation plus reserves. Answer: True Page: 99 Level: Easy 5. There are only 10 Federal Reserve Districts throughout the U.S., each one headed by a Federal Reserve Bank. Answer: False Page: 96-97 Level: Easy 6. The Federal Reserve check clearing system clears about 40 billion checks per year. Answer: False Page: 96-97 Level: Medium 7. The major asset of the Federal Reserve is currency outside banks, and the major liability is U.S. Treasury securities. Answer: False Page: 98 Level: Medium 8. The Check 21 Law is projected to save the banking industry as much as $3 billion per year. Answer: True Page: 97 Level: Easy 9. Federal Reserve Board members are appointed by the U.S. President and confirmed by the Senate for a non-renewable 14 year term. Answer: True Page: 93 Level: Easy 10. If the FOMC wished to generate faster economic growth, they could issue a policy directive to the Federal Reserve Board Trading desk to purchase U.S. government securities. Answer: True Page: 102-103 Level: Medium 11. An increase in Treasury securities held by the Fed leads to a decrease in the money supply. Answer: False Page: 103 Level: Medium Multiple Choice Questions 45
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12. The primary policy tool used by the Fed to meet its monetary policy goals is: A) Changing the discount rate B) Changing reserve requirements C) Devaluing the currency D) Changing bank regulations E) Open market operations Answer: E Page: 102 Level: Easy 13. The Federal Reserve System is charged with A) Regulating securities exchanges B) Conducting monetary policy C) Providing payment and other services to a variety of institutions D) Setting bank prime rates E) Both B and C Answer: E Page: 94 Level: Easy 14. The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds. A) Fedwire B) ACH C) CHIPS D) NASDAQ E) SWIFT Answer: B Page: 97-98 Level: Easy 15. The _____________ is a network linking over 6000 banks with the Federal Reserve that is used to transfer deposits and make loan payments between participants. A) Fedwire B) ACH C) CHIPS D) NASDAQ E) SWIFT Answer: A Page: 97-98 Level: Easy 16. Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand dropped the Fed would likely ______________. If the Fed was instead targeting interest rates and money demand dropped the Fed would likely _______________. A)
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This note was uploaded on 12/05/2011 for the course ECON 3311 taught by Professor L during the Spring '11 term at University of Texas at Dallas, Richardson.

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Ch04 - Chapter 4 The Federal Reserve System, Monetary...

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