Deck 8: Central Banks

Question 1

When the Federal Reserve was created in response to the Panic of 1907, it operated under a doctrine meant to correct the previous problems that led to the panic. Which of these statements best names and describes that doctrine?

A)The gold standard doctrine meant that central banks would only lend money to commercial banks if the commercial banks had gold as collateral.
B)The real bills doctrine meant that central banks should lend money to commercial banks with collateral only if those banks, in turn, would support "real" but not speculative economic activity.
C)The real bills doctrine meant that central banks should lend money to commercial banks when the commercial banks had paper bills as collateral.
D)The gold standard doctrine meant that commercial banks would have little incentive to engage in speculative activities.

Answer 1

B

Question 2

Which of these is currently true for the chair of the Federal Reserve?

A)The chair position is a term of just two years and is nonrenewable.
B)The chair position requires a background in economics or finance; the four-year term is renewable.
C)The chair position requires a background in banking or finance; the two-year term is nonrenewable.
D)The chair position has no formal qualifications; the four-year term is renewable.

Answer 2

D

Question 3

Which of these are among the primary responsibilities of the Federal Reserve?

A)Conducting monetary policy and printing US currency
B)Repaying the federal government debt and enforcing financial market regulations
C)Conducting monetary policy and acting as the fiscal agent of the US Treasury
D)Repaying the federal government debt and setting market interest rates

Answer 3

C

Question 4

Currently, the power of the Federal Reserve rests with

A)an elected board of governors of the Federal Reserve.
B)the chair of the Federal Reserve and a board of six governors.
C)the chair of the Fed and the board of the New York Federal Reserve Bank.
D)24 member banks.

Question 5

In the early days of the Fed, the discount rate, the rate at which the regional Federal Reserve banks would lend to commercial banks, was determined by the

A)regional Federal Reserve banks.
B)board of governors.
C)secretary of the treasury.
D)Federal Reserve bank of New York.

Question 6

At its inception and during its early days, the power of the Federal Reserve bank lay mostly

A)with the board of governors housed in the Treasury Department.
B)in the New York Federal Reserve Bank.
C)with the 12 independent regional Federal Reserve banks.
D)in the commercial banks that became members of the Federal Reserve system.

Question 7

When not responding to global financial meltdowns, the main goal of the monetary policy of the Bank of Japan is

A)to ensure employment stability.
B)to pursue price stability.
C)to pursue economic growth.
D)to eliminate debt to other nations.

Question 8

In the early stages of the 2007 financial crisis, the Fed introduced term auction lending

A)to increase market interest rates.
B)to stabilize inflation rates.
C)to increase the amount of liquidity in the financial system.
D)to decrease the amount of liquidity in the financial system.

Question 9

Which of these categories is the largest asset on the Federal Reserve's balance sheet-by far?

A)Gold
B)Gold, silver, and bitcoin
C)Repurchase agreements
D)Securities

Question 10

Following the Great Depression, the power of the Fed shifted to the

A)New York Federal Reserve Bank.
B)Federal Open Market Committee.
C)board of governors of the Federal Reserve.
D)secretary of the treasury.

Question 11

The board of governors of the Federal Reserve has three primary responsibilities, which are

A)oversight of the printing of money, commercial bank regulation, and the operations of the Fed.
B)the operations of the Fed, commercial bank regulation, and monetary policy.
C)monetary policy, fiscal policy, and the operations of the Fed.
D)maintenance of the gold standard, the operations of the Fed, and monetary policy.

Question 12

In 1968, Congress passed a key piece of legislation to protect consumers called the __________ Act.

A)Fair Credit Reporting
B)Fair Credit Billing
C)Truth in Lending
D)Truth in Savings

Question 13

Which of these statements is true of the board of governors of the Fed?

A)The board of governors is appointed by the chair and serves a four-year term.
B)The board of governors consists of six members plus the chair; the term length for members is fourteen years.
C)The board of governors consists of six members; the term length is four years.
D)The board of governors is elected once every eight years by the citizens of the United States.

Question 14

The securities that the Federal Reserve holds on its balance sheet include

A)US Treasury securities, federal agency debt, and privately issued mortgage-backed securities.
B)privately issued stocks, US Treasury securities, and federal agency debt.
C)municipal bonds, privately issued stocks, and US Treasury securities.
D)US Treasury securities, municipal bonds, and federal agency debt.

Question 15

The position of chair of the Federal Reserve is filled in what way?

A)The chair of the Fed is elected by a vote of the members of Congress.
B)The chair of the Fed is elected by a congressional committee of economic experts.
C)The chair of the Fed is appointed by the president of the United States and confirmed by the House of Representatives and the Senate.
D)The chair of the Fed is appointed by the president of the United States and confirmed by the US Senate.

Question 16

The Bank of Japan's ability to respond to the global financial crisis that began in 2007 was limited by

A)the control exerted on the Bank of Japan by the central government.
B)high interest rates in Japan.
C)a bloated balance sheet, which was a result of its response to a financial crisis in Japan in the late 1990s.
D)lack of coordination between the Bank of Japan and the US Federal Reserve Bank.

Question 17

The biggest change in the Federal Reserve's balance sheet between March 2007 and May 2013 was the __________ on the __________ side of the balance sheet.

A)increase in gold; asset
B)jump in depository institution deposits; liability
C)increase in currency outstanding; liability
D)decrease in repurchase agreements; asset

Question 18

The Federal Reserve district banks are primarily responsible for

A)interacting with the state governments within their districts, tracking the flow of money in and out of their districts, and tracking the flow of commerce in and out of their districts.
B)the check-clearing system, supervising and examining banks in their districts, and interacting with the state governments within their districts.
C)the check-clearing system, supervising and examining banks in their districts, and keeping track of the economy in their districts.
D)supervising and examining banks in their districts, keeping track of the economy in their districts, and tracking the flow of money in and out of their districts.

Question 19

When the Federal Reserve was created in 1913, what were its two primary purposes?

A)To regulate the financial sector of the US economy and maintain the gold standard
B)To print money (real bills)and lend only to banks committed to investment in "real" economic activity
C)To regulate the financial sector and be a "lender of last resort" to commercial banks
D)To maintain the gold standard and be a "lender of last resort" to commercial banks

Question 20

The increasing average debt burden of American households beginning in the mid-1990s coincided with which of these other facts?

A)An increase in the cost of living, counteracted only in part by an increase in financial market oversight
B)An increase in the cost of living, counteracted only in part by an increase in real wage growth
C)An increase in real wage growth, but a relaxation or elimination of many financial market regulations
D)A decrease in real wage growth, combined with the elimination of many financial market regulations

Question 21

Critics argue that the Bank of Japan was somewhat timid in its reaction to the global financial crisis that initiated in the United States in 2007. What is the Bank of Japan's response to that criticism?

Question 22

The three governing bodies of the European Central Bank (ECB)are the

A)open market committee, executive board, and governing council.
B)governing council, general council, and executive board.
C)governing council, general council, and executive committee.
D)executive board, general council, and monetary authority.

Question 23

What are the three most important functions of a nation's central bank?

Question 24

The Federal Reserve is part of the US Treasury.

Question 25

The two major goals of Canadian monetary policy are __________ and __________.

A)flexible exchange rates; economic growth
B)flexible exchange rates; inflation control
C)inflation control; economic growth
D)economic growth; low unemployment ​

Question 26

The responsibilities of the European Central Bank include

A)monetary policy, foreign exchange operations, and maintenance of the payments system.
B)management of gold reserves, monetary policy, and foreign exchange operations.
C)holding and management of official foreign reserves of Euro area countries, monetary policy, and management of economic growth in Eurozone countries.
D)management of economic growth in Eurozone countries, monetary policy, and foreign exchange operations.

Question 27

The primary responsibility of all central banks is monetary policy.

Question 28

The Financial Services Act of 2012 made it clear that the Bank of England is now the main regulator of British financial markets.

Question 29

The entity responsible for making the monetary policy decisions in the European Central Bank is the

A)president of the ECB.
B)governing council.
C)general council.
D)executive board.

Question 30

Eight times a year, the Bank of Canada announces the key policy rates for the nation. These key rates refer to what?

A)Rate of inflation
B)Rate of growth of the money supply
C)Overnight interest rate
D)Rate of economic growth

Question 31

The Consumer Financial Protection Bureau (CFPB), launched in 2011, is housed under the Federal Reserve.

Question 32

To achieve its goal of monetary stability, the Bank of England sets a target

A)interest rate of 2%.
B)economic growth rate of 2% per year.
C)growth rate of the money supply of 2% per year.
D)inflation rate of 2% per year.

Question 33

What can we learn from looking at the changes in the Federal Reserve's balance sheet between March 2007 and May 2013?

Question 34

Until the implementation of the Financial Services Act of 2012, the United Kingdom had a three-part framework for regulation of its financial system, consisting of the Bank of England, the Treasury Department, and which other entity?

A)The House of Lords
B)The House of Commons
C)The Financial Services Authority (FSA)
D)The Financial Policy Committee (FPC)

Question 35

The Bank of England has two primary responsibilities, which are __________ and __________.

A)monetary stability; financial stability
B)employment stability; monetary stability
C)economic growth; employment stability
D)economic growth; financial stability