Chapter 14 - The Federal Reserve and Monetary Policy

1		Monetary policy and fiscal policy have _____ goals and use _________ means to attain those goals as fiscal policy.
			A)	the same, the same
			B)	different, different
			C)	the same, different
			D)	different, the same
2		Which statement is true?
			A)	The Federal Reserve System is controlled by the president.
			B)	The Federal Reserve System is controlled by its 12 member banks.
			C)	The Federal Reserve is our central bank.
			D)	The Federal Reserve System dates back to the Civil War.
3		Over the last decade monetary policy may be considered
			A)	a great failure.
			B)	a mild failure.
			C)	a mild success.
			D)	a great success.
4		Since the late 1980s, the person most responsible for our monetary policy has been
			A)	Milton Friedman
			B)	John Maynard Keynes.
			C)	George Bush.
			D)	Bill Clinton.
			E)	Alan Greenspan.
5		Statement I: The Federal Reserve banks issue currency. Statement II: The main job of the Federal Reserve is to serve as a lender of last resort to commercial banks, savings banks, savings and loan associations, and credit unions.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
6		The members of the Board of Governors of the Federal Reserve
			A)	are appointed for life.
			B)	are virtually all former bankers.
			C)	are appointed by the Board when there are deaths or resignations.
			D)	basically control our monetary policy.
7		Which country shown below has the most independent central bank?
			A)	the U.S.
			B)	Germany
			C)	Japan
			D)	Italy
			E)	England
8		Statement I: Currency leakages tend to lower the deposit expansion multiplier. Statement II: The deposit expansion multiplier is, in reality, quite a bit lower than it would be if we based it solely on the reserve ratio.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
9		If you wrote a check on a bank in Chicago and sent it to someone in Atlanta, when that person deposited the check in her bank, the check would then be sent
			A)	directly back to your bank in Chicago.
			B)	directly to the Federal Reserve Bank in Chicago.
			C)	first to the Federal reserve District Bank in Atlanta, then to the Federal Reserve District Bank in Chicago, and then back to your bank in Chicago.
			D)	to the Federal Reserve Bank in Washington and then to your bank in Chicago.
10		As bond prices go up, interest rates tend to
			A)	rise.
			B)	fall.
			C)	remain the same.
11		Statement I: Reserve requirements are changed at least once or twice each year. Statement II: The key interest rate affected by the Federal Reserve is the federal funds rate.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
12		The discount rate is usually set
			A)	two or two and a half points above the federal funds rate.
			B)	one or one and a half points above the federal funds rate.
			C)	equal to or one half point above the federal funds rate.
			D)	equal to or one half point below the federal funds rate.
			E)	one or one and a half points below the federal funds rate.
13		To fight a recession the Fed will probably _________ U.S. government securities on the open market and ________ the discount rate.
			A)	sell, raise
			B)	sell, lower
			C)	buy, raise
			D)	buy, lower
14		Our growing involvement in the global economy
			A)	has tended to reduce the effectiveness of monetary policy.
			B)	has tended to increase the effectiveness of monetary policy.
			C)	has had no discernable effect on the effectiveness of monetary policy.
15		Under the Depository Institutions Deregulation and Monetary Control Act of 1980,
			A)	credit unions, savings and loan associations and savings banks were legally permitted to issue checking accounts.
			B)	all banks were required to join the Federal reserve.
			C)	all banks were exempt from reserve requirements.
			D)	nearly all state banking laws were abolished.