Question 1

The Consumer Credit Protection Act requires that lenders clearly explain consumer credit costs and prohibited them from charging overly high-priced credit transactions.

Accepted Answer

The Consumer Credit Protection Act, passed in 1968, includes several provisions to protect consumers in credit transactions. One of these is the requirement for lenders to provide clear and accurate information about the costs associated with borrowing money. The Act also prohibits lenders from engaging in certain unfair or deceptive practices, including charging excessively high interest rates or fees.

Question 2

Due to its easy-of-use, quantitative easing is the primary Fed monetary policy.

Accepted Answer

Quantitative easing is not the primary Fed monetary policy tool; the primary tool is the setting of the federal funds rate. Quantitative easing is used in extraordinary circumstances when traditional monetary policy tools are insufficient.

Question 3

A large portion of Fed employees hold jobs directly related to the Fed's role as fiscal agent for the U.S. government.

Accepted Answer

The Federal Reserve acts as the fiscal agent for the U.S. government, meaning they handle various financial transactions and services for the government. Therefore, many employees within the Fed are involved in these fiscal agent duties.

Question 4

As of early 2019, nearly all the checks processed for collection by Federal Reserve Banks are still received as paper checks.

Accepted Answer

As of early 2019, the majority of checks processed for collection by Federal Reserve Banks are done electronically through the Check 21 system, significantly reducing the number of paper checks.

Question 5

Empirical evidence shows that in countries where central banks are relatively independent from their governments, there has been higher inflation and lower economic growth rates than in countries where central banks are closely tied to their governments.

Accepted Answer

Empirical evidence suggests that countries with more independent central banks have lower inflation and higher economic growth rates. This is because independent central banks can focus on achieving stable prices and can resist pressure from governments to pursue expansionary policies that may lead to inflation.

Question 6

The Fed is no longer involved in processing checks.

Accepted Answer

The Federal Reserve still processes checks, although the volume has decreased significantly due to electronic payments. They continue to provide check clearing and settlement services.

Question 7

The federal funds rate is the interest rate on overnight loans from banks with excess reserves to the Fed.

Accepted Answer

The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis, not loans to the Fed.

Question 8

The Reserve Banks provide a wide range of important services to depository institutions and to the U.S. government.

Accepted Answer

The Reserve Banks provide various services to depository institutions, such as conducting monetary policy, providing payment services, supervising and regulating banks, and providing financial services to the U.S. government.

Question 9

Federal Reserve actions that stimulate or repress the level of prices or economic activity are called defensive activities.

Accepted Answer

Federal Reserve actions that stimulate or repress the level of prices or economic activity are actually called monetary policy actions. The aim of monetary policy is to promote economic growth, stabilization of prices, and maintain full employment. Defensive actions, on the other hand, are actions taken by investors or traders to protect themselves against potential losses in uncertain or volatile markets.

Question 10

The European Central Bank (ECB) conducts monetary policy for Britain.

Accepted Answer

The ECB is the central bank of the Eurozone countries and does not conduct monetary policy for non-Eurozone countries such as Britain. The Bank of England is responsible for conducting monetary policy in Britain.

Question 11

Banks are required by the Fed to hold reserves equal to a part of their deposits as part of the fractional reserve system of the U.S. banking system.

Accepted Answer

Banks are required to hold reserves as a part of the fractional reserve system, as mandated by the Federal Reserve.

Question 12

U.S. central bank that sets monetary policy and regulates banking system.
A) Government National Mortgage Association
B) Federal National Mortgage Association
C) Federal Home Loan Mortgage Corporation
D) Federal Reserve System

Accepted Answer

The Federal Reserve System, also known as the Fed, is the central bank of the United States. It is responsible for setting monetary policy, regulating the banking system, and conducting operations to stabilize the financial system. The other options listed are not central banks and do not have the same responsibilities as the Fed.

Question 13

Quantitative easing is when the Fed engages in purchasing financial assets from banks and other financial institutions with newly created money, resulting in larger bank excess reserves and increased money supply and liquidity.

Accepted Answer

Quantitative easing (QE) is a monetary policy tool used by central banks, including the Federal Reserve, to stimulate the economy by increasing the money supply and improving liquidity in the financial system. This is done by purchasing financial assets, such as government bonds or mortgage-backed securities, from banks and other financial institutions with newly created money, thereby increasing the bank excess reserves and overall money supply.

Question 14

The accommodative actions of the Fed includes buying treasury securities.

Accepted Answer

The answer of The accommodative actions of the Fed includes...

Question 15

All of the Chairmen of the Fed Board of Governors have been male.

Accepted Answer

Janet Yellen served as the Chair of the Federal Reserve Board of Governors from 2014 to 2018, making her the first woman to hold the position.

Question 16

The central bank of Japan is called the First Bank of Japan.

Accepted Answer

The central bank of Japan is called the Bank of Japan (BoJ), not the First Bank of Japan.

Question 17

The Federal Reserve has no power to regulate the overseas activities of member banks and bank holding companies.

Accepted Answer

The Federal Reserve has the authority to regulate the international activities of member banks and bank holding companies, ensuring they comply with U.S. banking laws and regulations even when operating abroad.

Question 18

Regulation Z requires that lenders clearly explain consumer credit costs and prohibited them from charging overly high-priced credit transactions.

Accepted Answer

The answer of Regulation Z requires that lenders clearly explain...

Question 19

The most-used instrument of monetary policy is open-market operations.

Accepted Answer

Open-market operations involve the buying and selling of government securities by the central bank, which directly impacts the money supply and can be adjusted to regulate interest rates and inflation. It is considered the most common and effective tool used by central banks to implement monetary policy.

Question 20

Dynamic actions are Fed activities that off set unexpected monetary developments and contribute to the smooth, everyday functioning of the economy.

Accepted Answer

The answer of Dynamic actions are Fed activities that off...

Quiz 4: Federal Reserve System