Question 1

The following passage is the opening paragraph from the April 13, 2016 Beige Book: Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand in late February and March, though the pace of growth varied across Districts. Most Districts said that economic growth was in the modest to moderate range and that contacts expected growth would remain in that range going forward. Consumer spending increased modestly in most Districts and reports on tourism were mostly positive. Labor market conditions continued to strengthen and business spending generally expanded across most Districts. Demand for nonfinancial services grew moderately overall. Manufacturing activity increased in most Districts. Construction and real estate activity also expanded. Credit conditions improved, on net, in most Districts. Low prices weighed on energy and mining output as well as prospects for agricultural producers. Overall, prices increased modestly across the majority of Districts, and input cost pressures continued to ease. From the passage, you might expect that the Fed would be given priority to:

Accepted Answer

The answer of The following passage is the opening paragraph...

Question 2

Which set of statements is correct?

Accepted Answer

The Federal Reserve has 12 regional banks and the Board of Governors has seven members, each serving a 14-year term.

Question 3

Which statement is NOT true?

Accepted Answer

There is no Federal Reserve Regional Bank located in Topeka. The Federal Reserve Banks are located in major cities such as Boston, Chicago, and San Francisco, among others, but not in Topeka.

Question 4

The _____ rate is the rate at which banks charge each other for overnight loans, while the _____ rate is the rate at which regional Federal Reserve banks charge depository institutions for short-term loans.

Accepted Answer

The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight, while the discount rate is the interest rate the Federal Reserve Banks charge commercial banks for short-term loans.

Question 5

All of these actions are performed by the Federal Reserve regional banks EXCEPT:

Accepted Answer

While the Federal Reserve System as a whole sets reserve requirements, the individual regional banks do not have the authority to set their own reserve requirements. Rather, this is handled at the national level by the Board of Governors in Washington, D.C.

Question 6

Which of these is related to the Federal Reserve System? I. The Federal Reserve Act of 1913
II) Employment Act of 1946
III) Sherman Antitrust Act of 1890
IV: International Banking Act of 1978
V: Civil Rights Act of 1964
VI: Full Employment and Balanced Growth Act of 1978

Accepted Answer

The answer of Which of these is related to the...

Question 7

The Federal Reserve's Board of Governors is based in which city?

Accepted Answer

The Federal Reserve's Board of Governors is based in Washington, D.C.

Question 8

The _____ oversee(s) the main tool of monetary policy.

Accepted Answer

The Federal Open Market Committee (FOMC) is responsible for conducting monetary policy in the United States. Its main tool is the buying and selling of government securities in the open market, which can influence the money supply and interest rates. The 12 regional Federal Reserve banks are part of the Federal Reserve system, but do not oversee monetary policy like the FOMC does. The Council of Economic Advisers and Congressional Budget Office are advisory bodies to the President and Congress, respectively, and do not have direct control over monetary policy.

Question 9

The main policymaking arm of the Fed is the:

Accepted Answer

The Federal Open Market Committee (FOMC) is responsible for making monetary policy decisions for the Federal Reserve System. It is composed of the seven members of the Board of Governors and five of the 12 Federal Reserve Bank presidents.

Question 10

The report that compiles economic conditions collected by the Federal Reserve regional banks is called the:

Accepted Answer

The report that compiles economic conditions collected by the Federal Reserve regional banks is called the Beige Book.

Question 11

In September 2013, the Federal Open Market Committee said it would wait for more evidence that progress had been made on the economic recovery before it cut back on open market purchases. The Bureau of Economic Analysis did not release its advanced estimate of the third quarter's GDP growth until a month after the quarter ended. The second estimate was released two months after the quarter ended, and a third revised estimate was released about three months after the quarter ended. This wait for accurate data to be collected is known as the:

Accepted Answer

The information lag refers to the delay in obtaining accurate and comprehensive data needed to assess the current state of the economy.

Question 12

The Federal Open Market Committee is responsible for:

Accepted Answer

The answer of The Federal Open Market Committee is responsible...

Question 13

Which statement(s) is(are) true? I. The Fed is required to promote economic growth accompanied by full employment, stable prices, and moderate long-term interest rates.
II) To fight high unemployment, the Fed must stimulate the economy. If the stimulus leads to inflation, the goal of promoting full employment conflicts with the goal of price stability.
III) The Fed may have to stimulate the economy to promote economic growth, which can lead to inflation. If the Fed is fighting inflation, it may have to raise interest rates, which conflicts with the goal of moderate long-term interest rates.

Accepted Answer

All statements are true. The Fed's dual mandate includes promoting maximum employment and stable prices, which can sometimes conflict. Stimulating the economy can lead to inflation, and fighting inflation can involve raising interest rates, conflicting with moderate long-term interest rates.

Question 14

Which characteristic of the Fed was NOT designed to help maintain the Fed's independence?

Accepted Answer

Fed Board members are not elected; they are appointed by the president and confirmed by the Senate. This statement is incorrect and does not relate to the Fed's independence.

Question 15

Which of these is NOT a lag inherent in monetary policy?

Accepted Answer

Interest rate lag is not a recognized type of lag in monetary policy. The other options are standard lags: information lag (time to gather data), recognition lag (time to identify economic trends), and decision lag (time to decide on policy actions).

Question 16

The financial panic and credit freeze in late 2008 pointed to the Fed's important role as a:

Accepted Answer

The financial panic and credit freeze in late 2008 demonstrated the importance of the Fed's role as a lender of last resort. During this crisis, the Fed provided liquidity to financial institutions to prevent a complete collapse of the financial system.

Question 17

Which action is NOT a tool of monetary policy?

Accepted Answer

Changing government spending and taxes is a tool of fiscal policy, not monetary policy. Monetary policy refers to actions taken by a central bank, such as the Federal Reserve in the US, to influence the availability and cost of money and credit in the economy. The tools of monetary policy include changing the discount rate, reserve requirements, and conducting open market operations.

Question 18

The Fed announced in September 2013 that it would postpone winding down its monetary stimulus until the economic recovery was stronger. When the Fed does finally begin to reduce bond purchases:

Accepted Answer

When the Fed reduces bond purchases, it decreases demand for bonds, leading to lower bond prices and higher yields, which results in rising interest rates.

Question 19

In February 2010, the Central Bank of Brazil raised reserve requirements. By raising those requirements, Brazil was attempting to:

Accepted Answer

Raising reserve requirements is a tool used by central banks to decrease the money supply in the economy. This is because by increasing the amount of reserves that banks are required to hold, they have less funds available to lend out, ultimately reducing the amount of money in circulation.

Question 20

The membership of the Board of Governors of the Federal Reserve System consists of:

Accepted Answer

The Board of Governors of the Federal Reserve System is composed of seven members who are appointed by the President of the United States and confirmed by the Senate.

Quiz 12: Money Creation and the Federal Reserve