a.
Four years.
c.
Fourteen years.
b.
Six years.
d.
Life or until the member resigns.
80. Decisions to buy or sell securities at the Fed are made by the:
a.
Congress.
b.
Federal Open Market Committee.
c.
Federal Deposit Insurance Corporation.
d.
President’s Council of Economic Advisors.
81. The Federal Reserve System was founded in:
a.
1913.
c.
1933.
b.
1929.
d.
1935.
82. Members of the Federal Reserve Board of Governors serve one nonrenewable term of:
a.
4 years.
c.
14 years.
b.
7 years.
d.
life.
83. The number of presidentially appointed members who sit on the Federal Reserve Board of Governors
is:
a.
none.
c.
nine.
b.
seven.
d.
twelve.
84. Decisions regarding purchases and sales of government securities by the Fed are made by the:
a.
Federal Funds Committee.
c.
Federal Open Market Committee.
b.
Discount Committee.
d.
FDIC.
85. Which of the following types of financial institutions is required to belong to the Federal Reserve
System?
a.
National banks.
c.
Savings and loan institutions.
b.
State-chartered banks.
d.
Credit unions.
86. With respect to controlling the money supply, the law requires the Fed to take orders from:
a.
the President.
b.
the Speaker of the House.
c.
the Secretary of the Treasury.
d.
no one⎯the Fed is an independent agency.
87. The seven members of the Board of Governors serve 14-year terms to:
a.
reduce political influence.
c.
inhibit independent decisions.
b.
provide steady employment.
d.
prevent illegal appointments.
88. Which of the following groups oversees and administers the Federal Reserve System?
a.
The House of Representatives.
b.
The President’s Council of Economic Advisors.
c.
The U.S. Treasury Department.
d.
None of these, the Fed is an independent agency.
89. Which of the following is not part of the Federal Reserve System?
a.
Council of Economic Advisors.
b.
Board of Governors.
c.
Federal Open Market Committee.
d.
12 Federal Reserve District Banks.
e.
Federal Advisory Council.
90. The Fed:
a.
has little control over the money supply.
b.
serves as the central bank for the United States.
c.
often uses a mix of lower taxes in its fiscal policy.
d.
ensures commercial bank profitability.
91. The Federal Reserve System:
a.
was created by and is owned by the government.
b.
pursues independent fiscal policy at the behest of Congress.
c.
never acts to control inflation.
d.
pursues an independent monetary policy which can conflict with the government’s
economic policy.
e.
only acts to lower taxes and increase spending when there are recessionary tendencies in
the economy.
92. The Fed’s principal decision-making body, which directs buying and selling U. S. government
securities, is known as the:
a.
Federal Deposit Insurance Corporation.
b.
District Board of Governors.
c.
Federal Open Market Committee.
d.
Reserve Requirement Regulation Conference.
93. The Fed is often considered the bankers’ bank because it:
a.
demands much more currency than it has available.
b.
no longer has a monopoly on printing paper currency.
c.
lowers the discount rate in order to restrict the money supply.
d.
holds bankers reserves, provides banks with currency and loans, and clears their checks.
e.
refuses to uses its power of open market operations when a quorum of state-chartered
bankers petitions it.
94. Who owns the Fed?
a.
The federal government.
b.
The states.
c.
The District Federal Reserve Banks.
d.
All banks.
e.
Member banks.
95. The main purpose of the Fed is to:
a.
serve as the bankers’ bank for member banks.
b.
regulate interest rates.
c.
print Federal Reserve Notes.
d.
regulate financial institutions.
e.
maintain the proper functioning of our money system.
96. In its function of controlling the money supply, the Fed does which one of the following?
a.
Controls the money supply.
b.
Clears checks.
c.
Regulates banks.
d.
Holds gold belonging to foreign governments.
e.
All of these.
97. The central bank of the United States is the:
a.
Federal Reserve Banking System.
b.
First National Bank.
c.
Comptroller’s Bank.
d.
United States National Bank.
e.
U.S. Treasury Bank.
98. The Federal Reserve System is divided into:
a.
2 districts.
b.
12 districts.
c.
26 districts.
d.
50 districts.
e.
1 district.
99. The Federal Reserve System is owned by:
a.
federal government agencies such as the Treasury.
b.
the Congress of the United States.
c.
the banks that are members of the Federal Reserve System.
d.
anyone who buys stock over the counter.
e.
people who have deposits in member banks.
100. The members of the Federal Reserve Board of Governors serve:
a.
6-year terms.
b.
4-year terms.
c.
10-year terms.
d.
14-year terms.
e.
2-year terms.
101. The Federal Reserve Board of Governors consists of:
a.
50 members selected by state legislatures.
b.
12 members, one from each Federal Reserve District.
c.
12 members nominated by the President and confirmed by the Senate.
d.
seven members elected by Congress.
e.
seven members nominated by the President and confirmed by the Senate.
102. The Federal Reserve Board of Governors has:
a.
seven members who serve 6-year terms.
b.
12 members who serve 14-year terms.
c.
seven members who serve 4-year terms.
d.
12 members who serve 4-year terms.
e.
seven members who serve 14-year terms.
103. Which of the following is in charge of the buying and selling of government securities by the Fed?
a.
The president.
c.
The Congress.
b.
The Federal Open Market Committee.
d.
None of these.
104. Which of the following institutions is responsible for supervising the banking system of the United
States?
a.
The Federal Reserve System.
b.
The Open Market Committee.
c.
The U.S. Treasury.
d.
The Federal Deposit Insurance Corporation.
105. Which of the following is not one of the functions of the Federal Reserve?
a.
Clearing checks.
c.
Supervising and regulating banks.
b.
Printing currency.
d.
Controlling the money supply.
106. Which of the following is not a function of the Federal Reserve System?
a.
To control the money supply.
b.
To print new money.
c.
To supervise and regulate banks.
d.
To aid in the check clearing process.
e.
To maintain and circulate currency.
107. The major protection against sudden mass attempt to withdraw cash from banks is the:
a.
Federal Reserve.
c.
deposit insurance provided by the FDIC.
b.
Consumer Protection Act.
d.
gold and silver backing the dollar.
108. Which of the following is the most important protection against fears of bank collapse?
a.
The Federal Reserve.
b.
The Federal Reserve Open Market Committee.
c.
The Federal Deposit Insurance Corporation.
d.
The gold and silver that backs Federal Reserve notes.
109. The Federal Deposit Insurance Corporation:
a.
has eliminated bank failures.
b.
insures all demand deposits without limit.
c.
insures all demand deposits up to $100,000.
d.
insures all demand deposits up to $10,000.
e.
insures all savings and loan deposits up to $100,000.
110. The government agency that provides insurance for all checkable deposits up to $100,000 in banks
choosing its protection is the:
a.
Federal Deposit Insurance Corporation.
b.
Federal Reserve.
c.
Office of Management and Budget.
d.
Treasury.
e.
Securities and Exchange Commission.
111. The Federal Deposit Insurance Corporation (FDIC):
a.
insures all demand deposit accounts up to $10 million in banks choosing FDIC protection.
b.
was created as a government-owned corporation following the creation of the World Bank
and the International Monetary Fund after World War II.
c.
rarely evaluates bank performance to detect weaknesses in operation.
d.
creates monetary policy in conjunction with the Federal Reserve Board.
e.
was created to reduce the risk of banking by compensating depositors and keeping bank
failures from spreading.
112. The Monetary Control Act of 1980:
a.
required banks to make home loans.
b.
eliminated many forms of competition among financial institutions.
c.
created sharper distinctions among various financial institutions.
d.
none of these.
113. The Monetary Control Act of 1980 extended the Fed’s authority to:
a.
impose required-reserve ratios on all depository institutions.
b.
control the discount rate.
c.
control the federal funds rate.
d.
all of these.
114. The Monetary Control Act of 1980:
a.
allowed savings and loan associations to offer checking accounts.
b.
allowed more institutions to offer checking account services.
c.
created greater competition among various financial institutions.
d.
all of the above.
e.
none of the above.
115. The Monetary Control Act of 1980:
a.
extended the Fed’s authority to impose required-reserve ratios on all depository
institutions.
b.
excluded the required-reserve ratios as an instrument of short-term policy.
c.
provided the Fed with the authority to use open market operations.
d.
all of the above.
e.
none of the above.
116. Which of the following laws increased competition among financial institutions and gave the Fed
greater control over nonmember banks?
a.
The Federal Reserve Act.
c.
The Monetary Control Act.
b.
The Equal Credit Opportunity Act.
d.
The Thrift Bailout Bill.
117. The Monetary Control Act of 1980:
a.
created less competition among various financial institutions.
b.
allowed fewer institutions to offer checking account services.
c.
restricted savings and loan associations to long-term loans.
d.
all of the above.
e.
none of the above.
TRUE/FALSE
1. An economy using money is more efficient that a barter economy because the use of money reduces
the time spent searching for trading partners with a coincidence of wants and therefore more time can
be spent producing goods and services.
2. Barter is a system of exchange that does not depend on a coincidence of wants.
3. Money eliminates the need to barter.
4. Credit cards are money because they serve the three functions of money.
5. Checkable deposits are not classified as money because they fail to provide a store of value.
6. By functioning as a unit of account, money provides a common measurement of the relative value of
goods and services.
7. Any item can successfully serve as money.
8. Money is said to be liquid because it is immediately available to spend for goods.
9. M1 includes savings accounts.
10. M1 is actually a smaller amount than M2.
11. In the United States, currency in circulation is the largest component of the M1 money supply.
12. Unused lines of credit on credit cards are part of M2.
13. M2 is actually a smaller amount than M1.
14. The Federal Reserve’s primary function is to control the money supply.
15. The Federal Reserve System is a branch of the Treasury Department.
16. The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank
failures brought on by the Great Depression.
17. The Federal Reserve System was created by an act of Congress in 1933 in an effort to end a wave of
bank failures brought on the Great Depression.
18. A majority of the commercial banks in the United States are not members of the Fed.
19. Although the chairman of its Board of Governors is appointed by the Treasury Department, the Fed
operates with considerable independence from the executive branch of the government.
20. Most commercial banks belong to the Federal Reserve System.
21. The Federal Funds Committee executes the purchases and sales of government securities decisions of
the Federal Reserve.
22. Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury
Department.
23. The Federal Reserve’s most important function is to change the money supply in order to smooth out
the business cycle.
24. The Federal Reserve System is run by the President of the United States.
25. The President and the Congress jointly determine the nation’s monetary policies, and the Fed is
required by law to implement those policies.
26. A majority of the commercial banks in the United States are members of the Fed.
27. The chairman of its Board of Governors is appointed by the president; the Fed operates without
independence from the executive branch of the government.
28. All banks are required to join the Fed.
29. The Fed’s responsibilities include controlling the money supply, clearing checks, and supervising and
regulating banks.
ESSAY
1. What is money? What are the three definitions of money in the United States?
2. Who runs the Federal Reserve System? Describe the organizational structure of the Fed.
3. Describe the functions of the Federal Reserve System.
