EC 303 - Central Bank and Federal Reserve System

EC 303 - JSU - Central Bank and Federal Reserve System

to reduce or eliminate future bank panics.

The primary reason for the creation of the Federal Reserve System ​was:

A.

to reduce or eliminate future bank panics.

B.

to eliminate​ state-chartered banks.

C.

to stabilize​ short-term interest rates.

D.

to create a single central bank similar to the Bank of England.

The writers of the Federal Reserve Act wanted to ensure the​ Fed's power was not centralized in a single location.

Why was the Federal Reserve System set up with twelve regional Federal Reserve banks rather than one central​ bank, as in other​ countries?

A.

With twelve regional​ banks, the Federal Reserve could easily influence politics in all parts of the United States.

B.

The writers of the Federal Reserve Act wanted to ensure the​ Fed's power was not centralized in a single location.

C.

By creating twelve regional​ banks, writers of the Federal Reserve Act could ensure that finances from all parts of the country would flow through the Federal Reserve System.

D.

With twelve regional​ banks, employees of the Federal Reserve could quickly and easily get to a monetary crisis point anywhere in the United States.

The requirement that all depository institutions keep deposits at the Fed.

Which of the following is not part of the checks and balances of the Federal Reserve System

A.

The​ Fed's independence from the federal government and the setting up of the Federal Reserve banks as incorporated institutions.

B.

The requirement that all depository institutions keep deposits at the Fed.

C.

The provision for three types of directors to district banks​ (A, B, and​ C) that would represent different groups​ (professional bankers, business​ people, and the​ public).

D.

The ability of the twelve regional banks to affect discount policy.

The Board of Governors

Which of the following entities in the Federal Reserve System controls the

discount rate?

A.

Member commercial banks

B.

The Federal Advisory Council

C.

The FDIC

D.

The Board of Governors

The Board of Governors

Which of the following entities in the Federal Reserve System sets reserve​ requirements?

A.

Member commercial banks

B.

The Federal Advisory Council

C.

The FDIC

D.

The Board of Governors

The FOMC

Which of the following entities in the Federal Reserve System directs open market operations?

A.

Member commercial banks

B.

The Board of Governors

C.

The Federal Advisory Council

D.

The FOMC

The Federal Reserve can choose any method it wants in order to achieve a given set of policy objectives.

How does the Federal Reserve have a high degree of instrument​ independence?

A.

The Federal Reserve can choose any method it wants in order to achieve a given set of policy objectives.

B.

The Federal Reserve is able to set the goals of monetary policy.

C.

The Federal Reserve is not subject to the influence of Congress.

D.

The Federal Reserve can contract with independent experts to choose the appropriate fiscal instruments.

The Fed is free to interpret exactly what these objectives mean.

If the Federal Reserve has a specific mandate from Congress to achieve​ "maximum employment and​ low, stable​ prices," then how does the Fed have goal​ independence?

A.

The Fed is free to interpret exactly what these objectives mean.

B.

The Fed is free to discuss the assigned goals with Congress.

C.

The Fed can choose any method it wants in order to achieve the assigned goal.

D.

The Fed is able to change its goals frequently.

The​ Fed's source of revenue is free from the appropriations process

The Fed is the most independent of all US government agencies. What is the main difference between it and other government agencies that explains the​ Fed's greater​ independence?

A.

The​ Fed's source of revenue is free from the appropriations process

B.

The Fed has established performance measures that it is required to achieve

C.

The Fed is a​ private, profit-making institution

D.

Congress cannot pass legislation that would restrict the​ Fed's independence

The threat that Congress will acquire greater control over the​ Fed's finances and budget.

What is the primary tool that Congress uses to exercise some control over the​ Fed?  

A.

The threat that Congress will acquire greater control over the​ Fed's finances and budget.

B.

The threat that Congress can withhold the​ Fed's appropriations.

C.

The threat that Congress can remove some members of the Board of Governors on a whim.

D.

All of the above are correct.

short-run objectives and thus be more likely to engage in expansionary policies designed to lower unemployment and interest rates before an election.

Eliminating the​ Fed's independence might lead to a more pronounced political business cycle because a politically exposed Fed would be more concerned with​:

A.

​long-run objectives and thus be more likely to engage in expansionary policies designed to lower unemployment and interest rates before an election.

B.

​short-run objectives and thus be more likely to engage in expansionary policies designed to lower unemployment and interest rates before an election.

C.

​long-run objectives and thus be a defender of a sound dollar and a stable price level.

D.

​short-run objectives and thus be a defender of a sound dollar and a stable price level.

it is undemocratic to have monetary policy controlled by an elite group responsible to no one

Critics of Fed independence argue​ that:

A.

it is undemocratic to have monetary policy controlled by an elite group responsible to no one

B.

the​ Fed, since it does not face a binding budget​ constraint, spends too much of its earnings

C.

an independent Fed conducts monetary policy with a consistent inflationary bias

D.

Only A and B are correct

it’s own welfare

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to​ maximize:

A.

profits.

B.

the​ public's welfare.

C.

its own welfare.

D.

conflicts between the executive and legislative branches of government.