66) The Board of Governors of the Federal Reserve System
A) appoint three directors to each Federal Reserve Bank.
B) elect six members to member commercial banks.
C) both of the above.
D) none of the above.
67) The Federal Advisory Council has ________ member(s) from each district.
A) one
B) two
C) three
D) can have any number of
68) The three largest Federal Reserve banks in terms of assets are those of New York, Chicago,
and
A) Atlanta.
B) Los Angeles.
C) Baltimore.
D) San Francisco.
69) The directors of a district bank are classified into three categories: A, B, and C. The three B
directors are
A) professional bankers.
B) prominent leaders from industry, labor, agriculture, or the consumer sector.
C) elected by the board of governors to represent the public interest.
D) all of the above.
70) The 12 Federal Reserve banks are involved in monetary policy in which of the following
ways?
A) Their directors establish the discount rate.
B) They decide which banks can obtain discount loans from the Federal Reserve Bank.
C) Their directors select one commercial banker from each bank’s district to serve on the Federal
Advisory Council.
D) all of the above.
71) The ________ of the Board of Governors is the spokesperson for the Fed.
A) chairman
B) president
C) either of the above can be the spokesperson
D) neither of the above
72) Currently, there are ________ countries that are members of the European Monetary Union.
A) 10
B) 17
C) 15
D) 20
1) The unusual structure of the Federal Reserve System is best explained by Americans’ fear of
centralized power.
2) Rapid money supply growth and uncontrollable inflation were among the factors which
motivated the creation of the Federal Reserve System.
3) The Washington, D.C. Fed bank, with over 30 percent of the system’s assets, is the most
important Federal Reserve Bank.
4) The FOMC is an element of the Federal Reserve System.
5) All nationally chartered banks are required to be members of the Fed.
6) Each member of the seven-member Board is appointed by the president and confirmed by the
Senate to serve 14-year terms.
7) The Board of Governors sets reserve requirements.
8) Monetary policy is set by the Board of Governors.
9) Federal Reserve monetary policy decisions must be approved by the Secretary of the Treasury
before they may be implemented.
10) The FOMC issues directives to the trading desk at the New York Fed.
11) Critics of the current system of Fed independence contend that the president has too much
control over monetary policy on a day-to-day basis.
12) Countries with more independent central banks have lower inflation rates, but these have
come at the expense of greater output fluctuations.
13) Announcing the FOMC‘s policy decision immediately after the FOMC meeting is an
example of how Fed policymaking has become more transparent.
14) The Fed has goal independence but not instrument independence.
15) The Federal Reserve banks act as liaisons between the business community and the Federal
Reserve System.
16) The FOMC does not actually carry out securities purchases or sales.
17) In the ECB, the Governing Council has the right to vote, and this right is taken very
seriously, with all important matters decided by a majority vote.
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9.3 Essay
1) Former Congressman Jack Kemp reportedly once said that he wanted to become the most
powerful man in Washington, D.C.—the chairman of the Board of Governors of the Federal
2) Former Board of Governors chairman Paul Volcker reportedly once said that the Federal
Reserve is free to pursue any policy it desires, as long as it convinces Congress that such a policy
3) What are the factors that promote the independence of the Federal Reserve?
4) What factors limit the independence of the Federal Reserve?
5) What are the arguments for and against an independent Fed?
6) What is the theory of bureaucratic behavior? What types of behavior does it predict the Fed
7) In recent years, has Fed policymaking become more or less transparent? Why?
8) Describe the structure and responsibility for policy tools in The Federal Reserve System.
9) Discuss similarities and differences between Ben Bernanke and Alan Greenspan in their
respective roles as chairman of the Federal Reserve Board.
10) How did the current Federal Reserve System evolve? What aspects of the American
11) Describe similarities and differences between the ECB and the US Fed.
12) Are central banks in other nations moving toward more or less independence? Why?