Question 1

The major asset of the Federal Reserve is

Accepted Answer

U.S. Treasury securities are the major asset of the Federal Reserve because they purchase these securities as part of their monetary policy operations to control the money supply and interest rates.

Question 2

Federal Reserve Board members are appointed by the U.S. President and confirmed by the Senate for a non-renewable 14-year term.

Accepted Answer

Federal Reserve Board members are appointed by the U.S. President and confirmed by the Senate for a non-renewable 14-year term.

Question 3

The discount rate is the rate that

Accepted Answer

The discount rate is the interest rate at which the Federal Reserve lends money to commercial banks.

Question 4

The major asset of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities.

Accepted Answer

The major asset of the Federal Reserve is U.S. Treasury securities, and its major liability is currency in circulation (outside banks).

Question 5

The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds.

Accepted Answer

The ACH (Automated Clearing House) is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds. Fedwire is a different payment system operated by the Fed for large value transfers. CHIPS (Clearing House Interbank Payments System) and SWIFT (Society for Worldwide Interbank Financial Telecommunication) are international payment systems. NASDAQ is a stock exchange.

Question 6

If the FOMC wished to generate faster economic growth, they could issue a policy directive to the Federal Reserve Board Trading desk to purchase U.S. government securities.

Accepted Answer

Purchasing U.S. government securities is a monetary policy tool used by the Federal Reserve to inject liquidity into the economy and promote economic growth. By purchasing these securities, the Fed increases the money supply, which can lower interest rates and stimulate spending and investment.

Question 7

The Fed offers three types of discount window loans. ______________ credit is offered to small institutions with demonstrable patterns of financing needs, _____________ credit is offered for short-term temporary funds outflows, and _____________ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

Accepted Answer

The answer of The Fed offers three types of discount...

Question 8

Four seats on the FOMC are allocated to Federal Reserve Bank presidents on an annual rotating basis.

Accepted Answer

This is correct. The FOMC has 12 voting members, consisting of the seven members of the Board of Governors and five of the 12 Federal Reserve Bank presidents. The four remaining presidents participate in FOMC meetings but do not have a vote. The five presidents who serve as voting members rotate on an annual basis.

Question 9

The monetary base is the amount of coin and currency in circulation plus reserves.

Accepted Answer

The monetary base includes the amount of coin and currency in circulation and reserves held by banks with the central bank.

Question 10

The fed funds rate is the rate that

Accepted Answer

The fed funds rate is the interest rate at which banks lend excess reserves to each other overnight. This transaction occurs in the federal funds market, and the Federal Reserve does not directly set the rate, but it uses open market operations to influence it.

Question 11

The _____________ is a network linking over 9,000 banks with the Federal Reserve that is used to transfer deposits and make loan payments between participants.

Accepted Answer

Fedwire is the network that links over 9,000 banks with the Federal Reserve for the purpose of transferring deposits and making loan payments. ACH is used for electronic fund transfers and direct deposits, but not necessarily between banks and the Federal Reserve. CHIPS is used for international wire transfers, NASDAQ is a stock exchange, and SWIFT is a global interbank messaging system.

Question 12

About 40% of all U.S. banks are members of the Federal Reserve System.

Accepted Answer

This statement is true. Roughly 40% of all banks and thrifts in the United States are members of the Federal Reserve System.

Question 13

An increase in Treasury securities held by the Fed leads to a decrease in the money supply.

Accepted Answer

An increase in Treasury securities held by the Fed leads to an increase in the money supply as the Fed is injecting funds into the economy by purchasing these securities.

Question 14

The primary policy tool used by the Fed to meet its monetary policy goals is:

Accepted Answer

Open market operations involve the buying and selling of government securities in the open market by the Fed. By buying securities, the Fed injects reserves into the banking system and increases the supply of money, which can lower interest rates and stimulate economic growth. Conversely, by selling securities, the Fed drains reserves from the banking system and reduces the supply of money, which can raise interest rates and cool down inflationary pressures. Therefore, open market operations are the primary tool used by the Fed to influence the level of interest rates and overall economic activity in the United States.

Question 15

The major liability of the Federal Reserve is

Accepted Answer

Currency outside banks is one of the major liabilities of the Federal Reserve. This refers to physical currency, such as bills and coins, that is in circulation outside of the banking system. As the issuer of currency, the Federal Reserve is responsible for ensuring there is enough money in circulation to meet the demands of the economy.

Question 16

Federal Reserve interest rate decisions can be vetoed by the U.S. President or the Congress.

Accepted Answer

The Federal Reserve is an independent entity and its interest rate decisions cannot be vetoed by the U.S. President or the Congress. However, the President can nominate and appoint members of the Federal Reserve Board, subject to Senate confirmation.

Question 17

Which of the following is the major monetary policy making body of the U.S. Federal Reserve System?

Accepted Answer

The Federal Open Market Committee (FOMC) is the major monetary policy making body of the U.S. Federal Reserve System. It consists of the seven members of the Board of Governors of the Federal Reserve System and five of the twelve Federal Reserve Bank presidents. The FOMC is responsible for setting monetary policy in the United States, including decisions about interest rates and the money supply.

Question 18

Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand dropped the Fed would likely ______________. If the Fed was instead targeting interest rates and money demand dropped the Fed would likely _______________.

Accepted Answer

The answer of Ceteris paribus, if the Fed was targeting...

Question 19

The seven members of the Board of Governors of the Federal Reserve System serve 14-year nonrenewable terms. Each Board member is appointed by the President and confirmed by the Senate.

Accepted Answer

This statement is true. Each Board member of the Federal Reserve System serves a 14-year nonrenewable term and is appointed by the President and confirmed by the Senate.

Question 20

Nationally chartered banks are required to become members of the Federal Reserve System.

Accepted Answer

Nationally chartered banks are required by law to become members of the Federal Reserve System. This requirement is stipulated in the Federal Reserve Act, which was passed by Congress in 1913. The purpose of this requirement is to ensure that member banks have access to the Federal Reserve's resources and can participate in the Federal Reserve's monetary policy functions.

Quiz 4: The Federal Reserve System, Monetary Policy, and Interest Rates

The major asset of the Federal Reserve is

Federal Reserve Board members are appointed by the U.S. President and confirmed by the Senate for a non-renewable 14-year term.

The discount rate is the rate that

The major asset of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities.

The _______________ is a nationwide network jointly operated by the Fed and private institutions that electronically process credit and debit transfers of funds.

If the FOMC wished to generate faster economic growth, they could issue a policy directive to the Federal Reserve Board Trading desk to purchase U.S. government securities.

Four seats on the FOMC are allocated to Federal Reserve Bank presidents on an annual rotating basis.

The monetary base is the amount of coin and currency in circulation plus reserves.

The fed funds rate is the rate that

The _____________ is a network linking over 9,000 banks with the Federal Reserve that is used to transfer deposits and make loan payments between participants.

About 40% of all U.S. banks are members of the Federal Reserve System.

An increase in Treasury securities held by the Fed leads to a decrease in the money supply.

The primary policy tool used by the Fed to meet its monetary policy goals is:

The major liability of the Federal Reserve is

Federal Reserve interest rate decisions can be vetoed by the U.S. President or the Congress.

Which of the following is the major monetary policy making body of the U.S. Federal Reserve System?

Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand dropped the Fed would likely . If the Fed was instead targeting interest rates and money demand dropped the Fed would likely _.

The seven members of the Board of Governors of the Federal Reserve System serve 14-year nonrenewable terms. Each Board member is appointed by the President and confirmed by the Senate.

Nationally chartered banks are required to become members of the Federal Reserve System.