Money and Banking Chapter 13 2025 – Study Guide & Lecture
Summary
When the charter of the Second Bank of the United States expired in 1836: - correct answer
✔✔ There was no lender of last resort to provide reserves to the banking system
The primary reason for the creation of the Federal Reserve System was: - correct answer ✔✔ To
reduce or eliminate future bank panics.
The many regional Federal Reserve banks resulted from a compromise between parties favoring
- correct answer ✔✔ A private central bank and those favoring a government institution.
The first central bank in the United States was - correct answer ✔✔ The First Bank of the United
States
The Federal Reserve System was established in 1913. Why? - correct answer ✔✔ Because the
public became convinced a central bank was needed to avoid bank panics
Why was the Federal Reserve System set up with twelve regional Federal Reserve banks rather
than one central bank, as in other countries? - correct answer ✔✔ The writers of the Federal
Reserve Act wanted to ensure the Fed's power was not centralized in a single location.
Why is the Twelfth Federal Reserve district so geographically large, while the Second Federal
Reserve district is so small by comparison? - correct answer ✔✔ The districts represent the
population and economic interests in 1913 when the Federal Reserve Act was created.
Should the Federal Reserve redraw its district boundaries, similar to how congressional districts
are periodically realigned? - correct answer ✔✔ Uncertain. This would require Congress to
rewrite the Federal Reserve Act, which could create opportunities for political interests to
interfere with the monetary policy process.
, Which of the following is not part of the checks and balances of the Federal Reserve System ? -
correct answer ✔✔ The requirement that all depository institutions keep deposits at the Fed.
"The Federal Reserve System resembles the U.S. Constitution in that it was designed with many
checks and
balances." Is this statement true, false, or uncertain? Explain your answer. - correct answer ✔✔
True. Because of public hostility and the centralization of power, the Federal Reserve System
was created with many checks and balances to diffuse power.
Which of the following entities in the Federal Reserve System controls the discount rate? -
correct answer ✔✔ The Board of Governors
Which of the following entities in the Federal Reserve System sets reserve requirements? -
correct answer ✔✔ The Board of Governors
Which of the following entities in the Federal Reserve System directs open market operations ? -
correct answer ✔✔ The FOMC
In what ways can the regional Federal Reserve Banks influence the conduct of monetary policy?
- correct answer ✔✔ By having members serve on the Federal Advisory Council & By having five
of their presidents sit on the FOMC & Through their administration of the discount facilities at
each bank.
Which of the following functions is not performed by the twelve Federal Reserve Banks? -
correct answer ✔✔ Setting the reserve requirement.
Which of the following is not an important reason for the regional Federal Reserve bank
presidents to attend the FOMC meetings, even if they are nonvoting members? - correct answer
✔✔ By attending meetings, nonvoting members can participate in deliberations and discussions
of the FOMC.
Summary
When the charter of the Second Bank of the United States expired in 1836: - correct answer
✔✔ There was no lender of last resort to provide reserves to the banking system
The primary reason for the creation of the Federal Reserve System was: - correct answer ✔✔ To
reduce or eliminate future bank panics.
The many regional Federal Reserve banks resulted from a compromise between parties favoring
- correct answer ✔✔ A private central bank and those favoring a government institution.
The first central bank in the United States was - correct answer ✔✔ The First Bank of the United
States
The Federal Reserve System was established in 1913. Why? - correct answer ✔✔ Because the
public became convinced a central bank was needed to avoid bank panics
Why was the Federal Reserve System set up with twelve regional Federal Reserve banks rather
than one central bank, as in other countries? - correct answer ✔✔ The writers of the Federal
Reserve Act wanted to ensure the Fed's power was not centralized in a single location.
Why is the Twelfth Federal Reserve district so geographically large, while the Second Federal
Reserve district is so small by comparison? - correct answer ✔✔ The districts represent the
population and economic interests in 1913 when the Federal Reserve Act was created.
Should the Federal Reserve redraw its district boundaries, similar to how congressional districts
are periodically realigned? - correct answer ✔✔ Uncertain. This would require Congress to
rewrite the Federal Reserve Act, which could create opportunities for political interests to
interfere with the monetary policy process.
, Which of the following is not part of the checks and balances of the Federal Reserve System ? -
correct answer ✔✔ The requirement that all depository institutions keep deposits at the Fed.
"The Federal Reserve System resembles the U.S. Constitution in that it was designed with many
checks and
balances." Is this statement true, false, or uncertain? Explain your answer. - correct answer ✔✔
True. Because of public hostility and the centralization of power, the Federal Reserve System
was created with many checks and balances to diffuse power.
Which of the following entities in the Federal Reserve System controls the discount rate? -
correct answer ✔✔ The Board of Governors
Which of the following entities in the Federal Reserve System sets reserve requirements? -
correct answer ✔✔ The Board of Governors
Which of the following entities in the Federal Reserve System directs open market operations ? -
correct answer ✔✔ The FOMC
In what ways can the regional Federal Reserve Banks influence the conduct of monetary policy?
- correct answer ✔✔ By having members serve on the Federal Advisory Council & By having five
of their presidents sit on the FOMC & Through their administration of the discount facilities at
each bank.
Which of the following functions is not performed by the twelve Federal Reserve Banks? -
correct answer ✔✔ Setting the reserve requirement.
Which of the following is not an important reason for the regional Federal Reserve bank
presidents to attend the FOMC meetings, even if they are nonvoting members? - correct answer
✔✔ By attending meetings, nonvoting members can participate in deliberations and discussions
of the FOMC.
