The primary reason for the creation of the Federal Reserve System
answer
to reduce or eliminate future bank panics.
question
The many regional Federal Reserve banks resulted from a compromise between parties favoring:
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a private central bank and those favoring a government institution.
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Why is the Twelfth Federal Reserve district so geographically large, while the Second Federal Reserve district is so small by comparison?
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The districts represent the population and economic interests in 1913 then the Federal Reserve Act was created.
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Why is the New York Federal Reserve always a voting member on the FOMC?
answer
.
The New York Federal Reserve is actively involved in the bond and foreign exchange markets.
B.
The New York Federal Reserve district contains many of the largest commercial banks in the United States.
C.
It is the only Federal Reserve bank that is a member of the Bank for International Settlements (BIS).
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Which of the following functions is not performed by any of the 12 regional Federal Reserve banks?
answer
Setting interest rates payable on time deposits
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Although neither _____ nor the _____ is officially set by the Federal Open Market Committee LOADING... , decisions concerning these policy tools are effectively made by the committee.
answer
reserve requirements; discount rate
question
Monetary policy is determined by
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The Federal Open Committee
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The Federal Open Market Committee is comprised of
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the seven members of the Board of Governors plus five of the twelve Federal Reserve Bank presidents.
question
The interest rate on overnight loans from one bank to another is the
answer
federal funds rate
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____ are the most important policy tool the Fed has for controlling the money supply.
answer
Open market operation
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The ability of the central bank to set the goals of monetary policy is known as
answer
goal independence
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The ability of the central bank to set reserve requirements is an example of
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Instrument independence
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Eliminating the Fed's independence might lead to a more pronounced political business cycle because a politically exposed Fed would be more concerned with:
answer
short-run objectives and thus be more likely to engage in expansionary policies designed to lower unemployment and interest rates before an election.
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A situation in which monetary policy is expansionary prior to an election and contractionary after an election is known as the
answer
Political Business Cycle
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An independent Federal Reserve
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Is less likely to produce higher inflation and less likely to produce a political business cycle.
question
The Federal Reserve Banks are ________ institutions since they are owned by the ________.
answer
quasi−public; private commercial banks in the district where the Reserve Bank is located
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Each Federal Reserve bank has nine directors. Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors.
answer
six; three
question
The nine directors of the Federal Reserve Banks are split into three categories: ________ are professional bankers, ________ are leaders from industry, and ________ are to represent the public interest and are not allowed to be officers, employees, or stockholders of banks.
answer
3; 3; 3
question
There are ________ members of the Board of Governors of the Federal Reserve System.
answer
7
question
Members of the Board of Governors are
answer
appointed by the president of the United States and confirmed by the Senate.
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Each governor on the Board of Governors can serve
answer
one full nonrenewable fourteen−year term plus part of another term.
question
The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________ renewable term.
answer
Four-yea
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The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________ renewable term.
answer
eight
question
The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the
answer
Federal Open Market Committee.
question
Each Fed bank president attends FOMC meetings; although only ________ Fed bank presidents vote on policy, all ________ provide input
answer
five-twelve
question
Subject to the approval of the Board of Governors, the decision of choosing the president of a district Federal Reserve Bank is made by
answer
district bank directors who are not professional bankers.
question
Goal independence is the ability of ________ to set monetary policy ________.
answer
the central bank; goals
question
Under the European System of Central Banks, the National Central Banks have the same role as the ________ of the Federal Reserve System.
answer
Federal Reserve Banks
question
While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy, its critics contend that its independence is
answer
limited by the Ministry of Finance's veto power over a portion of its budget.
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