Question 1

When reserves are added to the banking system,depository institutions may expand their lending but are not forced to do so.

Accepted Answer

A) True 
 B)False

Question 2

The Federal Reserve System replaced the system that existed under the National Banking Act.

Accepted Answer

A) True 
 B)False

Question 3

Because depository institutions earn no interest on reserves:

Accepted Answer

A)  profit maximizing behavior motivates them to lend out excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are high,this motivation is especially strong.
B)  profit maximizing behavior motivates them to lend out excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are low,this motivation is especially strong.
C)  profit maximizing behavior motivates them to retain excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are low,this motivation is especially strong.
D)  profit maximizing behavior motivates them to retain excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are high,this motivation is especially strong.
E)  none of the above

Question 4

It is generally agreed by the public that the Federal Reserve System:

Accepted Answer

A)  should not engage in international exchange controls
B)  carries out its functions reasonably well
C)  is distrusted by business as well as by banking interests
D)  should be under the control of the U.S.Treasury

Question 5

__________________ become the most important and effective means of monetary and credit control.

Accepted Answer

A)  Changing reserve requirements has
B)  Changing the discount rate has
C)  Open market operations has
D)  Changing the Treasury bill rate has
E)  none of the above

Question 6

Although a central bank does not necessarily operate for profit,it generally deals directly with the public.

Accepted Answer

A) True 
 B)False

Question 7

Because depository institutions earn no interest on reserves:

Accepted Answer

A)  profit maximizing behavior motivates them to retain excess reserves to the fullest extent consistent with their liquidity requirements;and when reserve requirements are low,this motivation is especially strong.
B)  profit maximizing behavior motivates them to lend out excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are low,this motivation is especially strong.
C)  profit maximizing behavior motivates them to retain excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are low,this motivation is especially strong.
D)  profit maximizing behavior motivates them to retain excess reserves to the fullest extent consistent with their liquidity requirements;and when interest rates are high,this motivation is especially strong.
E)  none of the above

Question 8

The members of the Fed Board of Governors are:

Accepted Answer

A)  elected by the member banks
B)  appointed by the President of the United States with the advice and consent of the Senate
C)  appointed by the Secretary of the Treasury
D)  appointed by each of the Federal Reserve banks
E)  none of the above

Question 9

__________ directors of the Federal Reserve are appointed by the Board of Governors of the Federal Reserve System and may not be stockholders,directors,or employees of existing banks.

Accepted Answer

A)  Class A
B)  Class B
C)  Class C
D)  Class D

Question 10

The Federated Requirement System (Fed)is the central bank of the United States and is responsible for setting monetary policy and regulating the banking system.

Accepted Answer

A) True 
 B)False

Question 11

Alan Greenspan's tenure as chair of the Fed Board was generally characterized by:

Accepted Answer

A)  real economic decline in the U.S.economy,interest rates that declined to historic lows,and stock prices that reached all-time highs.
B)  real economic growth in the U.S.economy,interest rates that rose to historic highs,and stock prices that reached all-time highs.
C)  real economic growth in the U.S.economy,interest rates that declined to historic lows,and stock prices that reached all-time lows.
D)  real economic growth in the U.S.economy,interest rates that declined to historic lows,and stock prices that reached all-time highs.
E)  none of the above

Question 12

Which of the following statements is most correct?

Accepted Answer

A)  Open-market operations always lead to an immediate increase in the volume of lending;this is especially true when bonds are sold to restrict deposit growth.
B)  Open-market operations don't always lead to an immediate change in the volume of deposits;this is especially true when bonds are purchased to expand deposit growth.
C)  Open-market operations always lead to an immediate change in the volume of deposits;this is especially true when bonds are sold to restrict deposit growth.
D)  Increasing reserve requirements always leads to an immediate increase in the volume of lending;this is especially true when bonds are sold to restrict deposit growth.
E)  none of the above

Question 13

The Federal Reserve System consists of all of the following components EXCEPT:

Accepted Answer

A)  Federal Reserve District Banks
B)  Board of Governors
C)  Federal Open Market Committee
D)  all of the above

Question 14

A central bank is required to hold reserves,and it has stockholders and a board of directors.

Accepted Answer

A) True 
 B)False

Question 15

Under the authority of the Federal Reserve Act of 1913:

Accepted Answer

A)  all national and state-chartered banks must become members of the Fed
B)  only national banks were permitted to become members of the Fed
C)  state-chartered banks were permitted to withdraw from membership with the Fed
D)  a system of deposit insurance was created

Question 16

____________________________ sets up a procedure for the prompt correction of errors on a revolving charge account and prevents damage to credit ratings while a dispute is being settled.

Accepted Answer

A)  Truth in Lending Act
B)  Equal Credit Opportunity Act
C)  Federal Trade Commission Improvement Act
D)  Fair Credit Billing Act

Question 17

The seven members of the Federal Reserve Board of Governors are responsible for the establishment of monetary policy.

Accepted Answer

A) True 
 B)False

Question 18

The ability to change reserve requirement is a powerful tool the Fed uses frequently.

Accepted Answer

A) True 
 B)False

Question 19

Banks with large transaction account balances hold the same percentage of reserves as all other banks.

Accepted Answer

A) True 
 B)False

Question 20

____________________________ requires disclosure of the finance charge and the annual percentage rate of credit along with certain other costs and terms to permit consumers to compare the prices of credit from differing sources.

Accepted Answer

A)  Truth in Lending Act
B)  Equal Credit Opportunity Act
C)  Federal Trade Commission Improvement Act
D)  Fair Credit Billing Act

Exam 4: Federal Reserve System

____________________________ requires disclosure of the finance charge and the annual percentage rate of credit along with certain other costs and terms to permit consumers to compare the prices of credit from differing sources.

Correct AnswerverifiedShow Answer

____________________________ sets up a procedure for the prompt correction of errors on a revolving charge account and prevents damage to credit ratings while a dispute is being settled.

Correct AnswerverifiedShow Answer

A central bank is required to hold reserves,and it has stockholders and a board of directors.

Correct AnswerverifiedShow Answer

The members of the Fed Board of Governors are:

Correct AnswerverifiedShow Answer

Which of the following statements is most correct?

Correct AnswerverifiedShow Answer

The Federated Requirement System (Fed)is the central bank of the United States and is responsible for setting monetary policy and regulating the banking system.

Correct AnswerverifiedShow Answer

Banks with large transaction account balances hold the same percentage of reserves as all other banks.

Correct AnswerverifiedShow Answer

When reserves are added to the banking system,depository institutions may expand their lending but are not forced to do so.

Correct AnswerverifiedShow Answer

__________________ become the most important and effective means of monetary and credit control.

Correct AnswerverifiedShow Answer

The Federal Reserve System consists of all of the following components EXCEPT:

Correct AnswerverifiedShow Answer

Because depository institutions earn no interest on reserves:

Correct AnswerverifiedShow Answer

The ability to change reserve requirement is a powerful tool the Fed uses frequently.

Correct AnswerverifiedShow Answer

The seven members of the Federal Reserve Board of Governors are responsible for the establishment of monetary policy.

Correct AnswerverifiedShow Answer

Although a central bank does not necessarily operate for profit,it generally deals directly with the public.

Correct AnswerverifiedShow Answer

It is generally agreed by the public that the Federal Reserve System:

Correct AnswerverifiedShow Answer

Alan Greenspan's tenure as chair of the Fed Board was generally characterized by:

Correct AnswerverifiedShow Answer

The Federal Reserve System replaced the system that existed under the National Banking Act.

Correct AnswerverifiedShow Answer

Because depository institutions earn no interest on reserves:

Correct AnswerverifiedShow Answer

Under the authority of the Federal Reserve Act of 1913:

Correct AnswerverifiedShow Answer

__________ directors of the Federal Reserve are appointed by the Board of Governors of the Federal Reserve System and may not be stockholders,directors,or employees of existing banks.

Correct AnswerverifiedShow Answer

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