Answer Ⅰ key terms 1 a board with seven governors

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Answer: . Key terms 1. A board with seven governors (including the chairman) that plays an essential role in decision making within the Federal Reserve System. 2.The committee that makes decisions regarding the conduct of open market operations; composed of the seven members of the Board of Governors of the Federal Reserve System, the president of the Federal Reserve Bank of New York, and the presidents of four other Federal Reserve banks on a rotating basis. 3.The 12 district banks in the Federal Reserve System. 4. The ability of the central bank to set the goals of monetary policy. 5. The ability of the central bank to set monetary policy instruments.
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6. A business cycle caused by expansionary policies before an election. . Multiple Choice 1 a 2 a 3 d 4 e 5 b 6 e 7 c 8 e 9 d 10 e 11 d 12 d 13 b 14 c 15 e 16 e 17 d 18 b 19 e 20 d . Analyzing and explanation 1.Answer:The formal structure of the Federal Reserve System consists of 12 regional Federal Reserve banks, around 4,800 member commercial banks, the Board of Governors of the Federal Reserve System, the Federal Open Market Committee, and the Federal Advisory Council. 2.Answer:Because of public hostility to central banks and the centralization of power, the Federal Reserve System was created with many checks and balances to diffuse power. 3.Answer:The Board of Governors sets reserve requirements and the discount rate; the FOMC directs open market operations. In practice, however, the FOMC helps make decisions about reserve requirements and the discount rate. 4.Answer:The New York district contains the largest banks in the country. The New York Fed supervises and examines these banks to insure their soundness and the safety of the nation’s financial system. The New York Fed conducts open market operations and foreign exchange transactions for the Fed and Treasury. The New York Fed belongs to the Bank for International Settlements, so its president and the chairman of the Board of Governors represent the U.S. at the monthly meetings of the world’s central banks. The New York Fed president is the only president of a regional Fed who is a permanent voting member of the FOMC. 5.Answer:Instrument independence is the ability of the central bank to set its instruments, and goal independence is the ability of a central bank to set its goals. The Fed enjoys both types of independence. The Fed is largely independent of political pressure due to its earnings and the conditions of appointment of the Board of Governors and its chairman. However, some political pressure can be applied through the threat or enactment of legislation affecting the Fed. Independence is important because there is some evidence that independent central banks pursue lower rates of inflation without harming overall economic performance. 6.Answer:The FOMC determines the monetary policy of the United States through its decisions about open market operations. It also effectively determines the discount rate and reserve requirements. The seven members of the Board of Governors, the president of the New York Fed, and four of the other eleven regional bank presidents are voting members on a rotating basis. Within the FOMC, the chairman of the Board of Governors wields the power
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