Question 1

It is often argued that price level stability must be the principal long-run goal of central bank policy and therefore, central banks must pay attention to:

Accepted Answer

A)   The level of net unemployment
B)   Stock market valuations
C)   How fast money and credit grow
D)   All of the above
E)   Choices A and C only

Question 2

The dollar volume of deposits that the banking system can create for each new dollar of excess legal reserves injected into the banking system is known as the deposit multiplier.

Accepted Answer

A) True 
 B)False

Question 3

The first central bank in the world, chartered in 1694, was the:

Accepted Answer

A)   Bank of France
B)   Bank of Italy
C)   Sonos Bank of Athens
D)   Federal Reserve System
E)   None of the above

Question 4

The most critical objective of the Federal Reserve is to:

Accepted Answer

A)   Avoid a liquidity squeeze
B)   Maintain stability in government security markets
C)   Carry out monetary policy
D)   Provide information to the public
E)   None of the above

Question 5

Each Federal Reserve bank sets its own discount rate and may do so without Federal Reserve Board approval.

Accepted Answer

A) True 
 B)False

Question 6

The FOMC must meet at least 4 times a year.

Accepted Answer

A) True 
 B)False

Question 7

The Federal Reserve Act, creating the system of Federal Reserve banks, was passed by Congress and signed into law in:

Accepted Answer

A)   1863-64
B)   1913
C)   1933
D)   1934
E)   None of the above

Question 8

The early structure of the Federal Reserve was:

Accepted Answer

A)   Centralized
B)   Decentralized
C)   Chaotic
D)   Not what Congress intended
E)   None of the above

Question 9

What are the required conditions in order for a new bank charter to be approved in the United States?

Accepted Answer

A)   Not endangering the viability of local banks
B)   Prior approval of the board of directors by the Federal Reserve
C)   Must be profitable within a reasonable period of time
D)   Must satisfy minimum equity capital conditions
E)   All of the above are required conditions for a bank charter approval

Question 10

Central banking in the U.S. is directed toward

Accepted Answer

A)   Full employment
B)   Reasonable price stability
C)   Stable balance of payments
D)   Sustainable economic growth
E)   All of the above

Question 11

Which of the following did not cause the creation of the Federal Reserve System?

Accepted Answer

A)   Need for a money or cash medium
B)   Check clearing fees
C)   Liquidity crises
D)   Loan losses
E)   All of the above contributed to the Fed's formation

Question 12

If the central bank reduces a nation's rate of growth in its monetary supply (or money stock) income and spending in the economy should grow more slowly.

Accepted Answer

A) True 
 B)False

Question 13

The Federal Reserve System's chief policy tool when the System was first created was:

Accepted Answer

A)   Open market operations
B)   Moral suasion
C)   Reserve requirements
D)   Discount rate
E)   None of the above

Question 14

By controlling the rate of growth in the money supply, the central bank expects to

Accepted Answer

A)   Influence the rate of growth in the economy
B)   Reduce bank failure
C)   Encourage banks to join the Federal Reserve System
D)   Reduce the deficit
E)   Control stock market activity

Question 15

Money can be anything that serves as a medium of exchange in the purchase of goods and services.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following roles of today's Federal Reserve System was proven effective following the terrorist attacks of September 2001?

Accepted Answer

A)   Maintaining a sound banking and financial system
B)   Serving as the federal government's fiscal agent
C)   Providing information to the public
D)   Carrying out monetary policy
E)   The clearing and collection of checks and other means of payment

Question 17

Required reserves earn no interest.

Accepted Answer

A) True 
 B)False

Question 18

The Federal Reserve can influence the size of the money multiplier but not the size of the monetary base.

Accepted Answer

A) True 
 B)False

Question 19

The world's newest central bank is the:

Accepted Answer

A)   People's Bank of China
B)   Bank of America
C)   Banco Central de Brasil
D)   European Central Bank
E)   None of the above

Question 20

The power to regulate the quantity and value of money has been delegated by Congress to the U.S. Treasury Department.

Accepted Answer

A) True 
 B)False

Exam 12: Exploring Central Banks and Their Impact on the Economy and Financial System

The Federal Reserve can influence the size of the money multiplier but not the size of the monetary base.

Correct AnswerverifiedShow Answer

The dollar volume of deposits that the banking system can create for each new dollar of excess legal reserves injected into the banking system is known as the deposit multiplier.

Correct AnswerverifiedShow Answer

Each Federal Reserve bank sets its own discount rate and may do so without Federal Reserve Board approval.

Correct AnswerverifiedShow Answer

By controlling the rate of growth in the money supply, the central bank expects to

Correct AnswerverifiedShow Answer

The power to regulate the quantity and value of money has been delegated by Congress to the U.S. Treasury Department.

Correct AnswerverifiedShow Answer

Money can be anything that serves as a medium of exchange in the purchase of goods and services.

Correct AnswerverifiedShow Answer

It is often argued that price level stability must be the principal long-run goal of central bank policy and therefore, central banks must pay attention to:

Correct AnswerverifiedShow Answer

Which of the following roles of today's Federal Reserve System was proven effective following the terrorist attacks of September 2001?

Correct AnswerverifiedShow Answer

Required reserves earn no interest.

Correct AnswerverifiedShow Answer

The early structure of the Federal Reserve was:

Correct AnswerverifiedShow Answer

If the central bank reduces a nation's rate of growth in its monetary supply (or money stock) income and spending in the economy should grow more slowly.

Correct AnswerverifiedShow Answer

Which of the following did not cause the creation of the Federal Reserve System?

Correct AnswerverifiedShow Answer

What are the required conditions in order for a new bank charter to be approved in the United States?

Correct AnswerverifiedShow Answer

The most critical objective of the Federal Reserve is to:

Correct AnswerverifiedShow Answer

Central banking in the U.S. is directed toward

Correct AnswerverifiedShow Answer

The Federal Reserve Act, creating the system of Federal Reserve banks, was passed by Congress and signed into law in:

Correct AnswerverifiedShow Answer

The first central bank in the world, chartered in 1694, was the:

Correct AnswerverifiedShow Answer

The world's newest central bank is the:

Correct AnswerverifiedShow Answer

The Federal Reserve System's chief policy tool when the System was first created was:

Correct AnswerverifiedShow Answer

The FOMC must meet at least 4 times a year.

Correct AnswerverifiedShow Answer

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