Question 1

The text identifies three principal channels of central bank policy which describe how a central bank can influence the economy.

Accepted Answer

False

Question 2

An early goal of the Federal Reserve System was to make the U.S. money supply inelastic to changes in production and income so that it would not go through swings in magnitude.

Accepted Answer

The early goal of the Federal Reserve System was actually to make the U.S. money supply more elastic, to better accommodate changes in demand for money due to fluctuations in production, trade, and income, thereby aiming to stabilize the economy and avoid the banking panics and financial crises that were common prior to its establishment in 1913.

Question 3

The central banks of Germany and Switzerland operate under greater freedom from government control than in most other nations.

Accepted Answer

The central banks of Germany (Bundesbank) and Switzerland (Swiss National Bank) are known for their high degree of independence from their respective governments, allowing them to operate with greater freedom compared to many other nations' central banks. This independence is crucial for maintaining their primary focus on price stability and monetary policy without direct political interference.

Question 4

According to your text, the functions of central banks usually include:

Accepted Answer

The answer of According to your text, the functions of...

Question 5

In Japan the agency that controls bank reserve requirements is the:

Accepted Answer

The answer of In Japan the agency that controls bank...

Question 6

In 2006 the Federal Reserve banks collectively held securities worth over

Accepted Answer

The answer of In 2006 the Federal Reserve banks collectively...

Question 7

If the Federal Reserve requires a reserve requirement, RR, equal to 10% and the bank has found an excess of $1,000,000 in reserves, then the bank could absorb an additional deposits and loans equal to

Accepted Answer

With a reserve requirement (RR) of 10%, the bank must keep 10% of deposits as reserves. If the bank has an excess of $1,000,000 in reserves, it can support additional deposits of $10,000,000, because 10% of $10,000,000 is $1,000,000, which is the amount of excess reserves available to cover the new deposits.

Question 8

What functions do central banks perform in a market-oriented economy? Explain why each function you have listed is important in the functioning of a market-oriented economic system.

Accepted Answer

The answer of What functions do central banks perform in...

Question 9

What are the principal goals that central banks pursue as they work to carry out monetary policy?

Accepted Answer

The answer of What are the principal goals that central...

Question 10

To what extent are the principal goals of central bank monetary policy consistent or inconsistent with each other? What does a central bank do when the goals it wishes to pursue directly conflict with each other?

Accepted Answer

The answer of To what extent are the principal goals...

Question 11

What are the principal channels through which central banks, including the Federal Reserve System, work to influence the economy and achieve their goals?

Accepted Answer

The answer of What are the principal channels through which...

Question 12

What major problems in the late nineteenth and early 20th century led to the creation of the Federal Reserve System? How did the creation of the Fed help to solve these problems?

Accepted Answer

The answer of What major problems in the late nineteenth...

Question 13

In what important ways did the early Federal Reserve System differ from the Federal Reserve we see today?

Accepted Answer

The answer of In what important ways did the early...

Question 14

What are the principal responsibilities assigned to the Board of Governors of the Federal Reserve System? To the Federal Open Market Committee?

Accepted Answer

The answer of What are the principal responsibilities assigned to...

Question 15

What are the Federal Reserve Banks expected to do in serving the public and the banking system?

Accepted Answer

The answer of What are the Federal Reserve Banks expected...

Question 16

What duties are assigned to the manager of the System Open Market Account within the Federal Reserve System?

Accepted Answer

The answer of What duties are assigned to the manager...

Question 17

List the principal functions of the Federal Reserve System today and explain why each of these functions is important.

Accepted Answer

The answer of List the principal functions of the Federal...

Question 18

What is the Federal Reserve's primary job (that is, its principal role or function)?

Accepted Answer

The answer of What is the Federal Reserve's primary job...

Question 19

When we use the term ECB what is meant?

Accepted Answer

The answer of When we use the term ECB what...

Question 20

How is the ECB similar to the Federal Reserve and in what ways is it different from the Fed?

Accepted Answer

The answer of How is the ECB similar to the...

Quiz 12: Roles and Services of the Federal Reserve and Other Central Banks Around the World