11.3 The Federal Reserve System
1) A public authority that provides banking services to commercial banks and regulates
inancial institutions and markets is called a
A) commercial bank.
B) thrift institution.
C) central bank.
D) money market fund.
E) mint.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
2) All of the following are inancial institutions that accept deposits and make loans to
people and businesses EXCEPT
A) commercial banks.
B) savings and loans.
C) credit unions.
D) central banks.
E) savings banks.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
3) As the central bank, the Federal Reserve System provides banking services to
A) individuals and controls the quantity of money.
B) the government and the stock market.
C) foreign corporations and determines the exchange rate.
D) banks and regulates inancial institutions and markets.
E) banks and determines how much the U.S. government will borrow.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
41
4) Because the Federal Reserve System is a central bank, it provides banking services to
A) businesses only.
B) consumers and business.
C) commercial banks.
D) no one.
E) the government only.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
5) The Federal Reserve System provides banking services to ________ because ________.
A) consumers and businesses; it is a central bank with responsibilities to the entire U.S.
population
B) banks and businesses; it is a central bank with the primary purpose of regulating
inancial institutions and markets
C) commercial banks; it is a central bank with the primary purpose of regulating inancial
institutions and markets
D) no one; it is a central bank with the primary purpose of regulating inancial markets
E) FDIC insured banks; they are the ones that have paid their membership fees and the
only ones the U.S. central bank guarantees
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: New
AACSB: Relective thinking
6) The Fed is a central bank and as such
A) does business only with the federal government.
B) provides banking services to banks but not individuals.
C) provides banking services to individuals and irms.
D) does business with international organizations such as the United Nations.
E) is where the Federal Government turns when it needs to borrow.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
42
7) What is the central bank of the United States?
A) There is no central bank in the United States.
B) The Department of Treasury
C) The Federal Reserve System
D) Each state has its own central bank, which, when all taken together, constitute the
central bank of the United States.
E) The U.S. Mint
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
8) ________ the quantity of money in the United States.
A) The State Department regulates
B) The Department of Treasury regulates
C) The Federal Reserve System regulates
D) Commercial banks regulate
E) The President of the United States regulates
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
9) The Federal Reserve System is organized into
A) one large district covering the entire United States.
B) three districts, one for each of the countries in North America.
C) 12 districts, dividing up the United States.
D) 12 districts, dividing up the countries in North America.
E) 50 districts, one per state.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
43
10) Conducting the nation’s monetary policy is the duty of the
A) Department of Commerce.
B) U.S. Treasury department.
C) Federal Reserve System.
D) Federation of Banks.
E) Federal Bank Supervisor.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
11) Who regulates the quantity of money circulating in the economy?
A) the Federal Reserve
B) the banking system
C) the U.S. Congress
D) the President of the United States
E) The U.S. Congress and the President share the control.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
12) The Federal Reserve System is organized into ________ Federal Reserve districts.
A) 6
B) 10
C) 12
D) 15
E) 50
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
44
13) All of the following are elements in the structure of the Fed EXCEPT the
A) Federal Open Market Committee.
B) Executive Council to the Governor.
C) 12 Federal Reserve Banks.
D) Board of Governors.
E) presidents of the 12 Federal Reserve Banks.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
14) The Board of Governors of the Federal Reserve is
A) the collection of the 12 presidents of the Federal Reserve Banks.
B) a seven-member board, each one serving a 14-year term.
C) a 14-member board, each one serving a seven-year term.
D) the main policy-making body of the Fed.
E) a seven-member board, each one serving a one-year term.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
15) The Board of Governors of the Federal Reserve System has
A) seven members serving for 12-year terms.
B) 12 members serving for seven-year terms.
C) seven members serving for seven-year terms.
D) seven members serving for 14-year terms.
E) seven members serving life terms.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
45
16) The Board of Governors has
A) seven members appointed to 14-year terms.
B) 14 members appointed to 10-year terms.
C) four members appointed to seven-year terms.
D) 14 members appointed to four-year terms.
E) seven members appointed for life.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
17) The Federal Open Market Committee is
A) the main policy making body of the Fed.
B) a seven-member board, each serving a 14-year term.
C) comprised of the presidents of the 12 Federal Reserve Banks.
D) another name for the Board of Governors.
E) the government committee charged with determining income tax rates.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
18) The main policy making body of the Federal Reserve System is the
A) Board of Governors of the Federal Reserve System.
B) Board of Presidents of the Federal Reserve Banks.
C) Federal Open Market Committee.
D) Board of Advisors.
E) Federal Monetary Conditions Board.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
46
19) Which of the following Federal Reserve Banks carries out the decisions of the FOMC?
A) the Kansas City Federal Reserve Bank
B) the New York Federal Reserve Bank
C) the Dallas Federal Reserve Bank
D) the San Francisco Federal Reserve Bank
E) the Atlanta Federal Reserve Bank
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
20) The voting members of the Federal Open Market Committee consists of the
A) seven Board of Governor members and the 12 Federal Reserve Bank presidents.
B) seven Board of Governor members and ive Federal Reserve Bank presidents.
C) 12 Board of Governor members and the seven Federal Reserve Bank presidents.
D) 12 Board of Governor members and the ive Federal Reserve Bank presidents.
E) six Board of Governor members and six Federal Reserve Bank presidents.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
21) The Federal Open Market Committee consists of
A) 12 members, all of whom are the presidents of Federal Reserve Banks.
B) 12 members, seven of whom are the members of the Board of Governors, four of whom
are presidents of Federal Reserve Banks, and the president of the United States.
C) 12 members, seven of whom are the members of the Board of Governors and ive of
whom are presidents of Federal Reserve Banks.
D) 12 committees, all serving on the Board of Governors.
E) 12 members, split evenly so that six of whom are members of the Board of Governors
and six of whom are presidents of Federal Reserve Banks.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
47
22) In order to inluence the interest rate, the Federal Reserve System can immediately
adjust the
A) reserves of the banking system.
B) inlation level.
C) unemployment rate.
D) taxes that citizens must pay.
E) amount the government borrows.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
23) The four main policy tools the Federal Reserve System uses to inluence the interest
rate are setting
A) the prime rate, open market operations, extraordinary crisis management and setting
the excess reserve ratio.
B) quantitative easing, market interest rate and the discount rate, as well as open market
operations.
C) the discount rate, open market operations, extraordinary crisis measures and setting the
required reserve ratio.
D) credit easing, the discount rate, setting tax rates, and setting the required reserve ratio.
E) quantitative easing, open market operations, setting tax rates, and setting the required
reserve ratio.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
24) Which of the following is NOT one of the Fed’s monetary policy tools?
A) changing the discount rate
B) conducting open market purchases of government securities
C) changing the coupon rate
D) changing the required reserve ratio
E) conducting open market sales of government securities
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
48
25) Which of the following is a tool the Federal Reserve System can use to regulate the
quantity of money?
i. changing the discount rate
ii. conducting open market operations
iii. changing the required reserve ratio
A) i only
B) ii only
C) ii and iii
D) i and ii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
26) Which of the following is a policy tool of the Fed?
i. setting the required reserve ratios
ii. conducting open market operations
iii. quantitative easing
A) i only
B) ii only
C) iii only
D) Both i and ii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
27) The Fed inluences the interest rate by using which of the following tools?
i. open market operations
ii. taxes on bank accounts
iii. changes in required reserve ratios
A) i only
B) ii only
C) iii only
D) Both i and iii
E) i, ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
28) Which of the following are policy tools used by the Federal Reserve?
i. the federal personal income tax
ii. open market operations
iii. changing the required reserve ratio
A) i only
B) ii only
C) iii only
49
D) ii and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
29) Which of the following is a tool the Fed uses to adjust the quantity of money?
i. The Fed can change the interest rate banks charge for loans to their prime customers.
ii. The Fed can change the discount rate on loans to banks.
iii. The Fed can buy or sell government securities.
A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
30) Required reserve ratios are the minimum amount of
A) deposits any one bank is allowed to accept as percentage of its capital.
B) reserves any one bank must hold as a percentage of its loans.
C) reserves any one bank must hold as a percentage of its deposits.
D) deposits any one bank must hold as a percentage of its reserves.
E) reserves any one bank must hold as a percentage of its total assets.
Skill: Level 1: Deinition
Section: Checkpoint 11.3
Status: Old
AACSB: Relective thinking
50