ECON 343 EXAM 3 QUESTIONS
COMPLETE WITH 100% VERIFIED
ANSWERS
\.2 concepts of central bank independence - ANSWERS✔-instrument
independence and goal independence
\.Instrument independence - ANSWERS✔-The ability of the central bank to set its
instruments
\.Goal independence - ANSWERS✔-The ability of a central bank to set its goals
\.The Fed is politically independent due to its: - ANSWERS✔-earnings and the
conditions of
appointment of the Board of Governors and its chairman
\.Central bank independence is important because: - ANSWERS✔-There's some
evidence that independent central banks pursue lower rates of inflation without
harming overall economic performance
\.Make the case For and Against an independent federal reserve - ANSWERS✔-
For: Having an independent federal reserve can shield the economy from a
,political business cycle, also having control of the money supply can be helpful
when you have inexperienced politicians
Against: It isn't democratic to have the money supply controlled by a small
number of people who may or may not be accountable. If the fed is independent
it may pursue its own interest over the publics
\.Who are the voting members of the Federal Open Market Committee and why is
this committee important? - ANSWERS✔-The Federal Open Market Committee
determines the policy of the US through its decisions about market operations. It
determines the discount rate and reserve requirements.
\.Where does the power lie within the Federal Open Market Committee? -
ANSWERS✔-The 7 members of the board of governors, the president of the NY
Fed, and 4 of the other 11 regional bank presidents are voting members on a
rotating basis. The chairman of the board of governors has this power.
\.The First Bank of the US:
a. was disbanded in 1811 when it's charter wasn't renewed
b. had its charter renewal vetoed in 1832
c. was fundamental in helping the Federal Government finance the War of 1812
d. none of the above - ANSWERS✔-a. was disbanded in 1811 when it's charter
wasn't renewed
\.The public's fear of centralized power and distrust of moneyed interests led to
the demise of the first
two experiments in central banking:
, a. the First Bank of the United States and the Second Bank of the United States.
b. the First Bank of the United States and the Central Bank of the United States.
c. the First Central Bank of the United States and the Second Central Bank of the
United States.
d. the First Bank of North America and the Second Bank of North America -
ANSWERS✔-a. the First Bank of the United States and the Second Bank of the
United States.
\.The financial panic of 1907 resulted in such widespread bank failures and
substantial losses to
depositors that the American public finally became convinced that
a. the First Bank of the United States had failed to serve as a lender of last resort.
b. the Second Bank of the United States had failed to serve as a lender of last
resort.
c. the Federal Reserve System had failed to serve as a lender of last resort.
d. a central bank was needed to prevent future panics - ANSWERS✔-d. a central
bank was needed to prevent future panics
\.The Fed's support of the Depository Institutions Deregulation and Monetary
Control Act of 1980
stemmed in part from its
a. concern over declining Fed membership.
b. belief that all banking regulations should be eliminated.
c. belief that interest rate ceilings were too high.
COMPLETE WITH 100% VERIFIED
ANSWERS
\.2 concepts of central bank independence - ANSWERS✔-instrument
independence and goal independence
\.Instrument independence - ANSWERS✔-The ability of the central bank to set its
instruments
\.Goal independence - ANSWERS✔-The ability of a central bank to set its goals
\.The Fed is politically independent due to its: - ANSWERS✔-earnings and the
conditions of
appointment of the Board of Governors and its chairman
\.Central bank independence is important because: - ANSWERS✔-There's some
evidence that independent central banks pursue lower rates of inflation without
harming overall economic performance
\.Make the case For and Against an independent federal reserve - ANSWERS✔-
For: Having an independent federal reserve can shield the economy from a
,political business cycle, also having control of the money supply can be helpful
when you have inexperienced politicians
Against: It isn't democratic to have the money supply controlled by a small
number of people who may or may not be accountable. If the fed is independent
it may pursue its own interest over the publics
\.Who are the voting members of the Federal Open Market Committee and why is
this committee important? - ANSWERS✔-The Federal Open Market Committee
determines the policy of the US through its decisions about market operations. It
determines the discount rate and reserve requirements.
\.Where does the power lie within the Federal Open Market Committee? -
ANSWERS✔-The 7 members of the board of governors, the president of the NY
Fed, and 4 of the other 11 regional bank presidents are voting members on a
rotating basis. The chairman of the board of governors has this power.
\.The First Bank of the US:
a. was disbanded in 1811 when it's charter wasn't renewed
b. had its charter renewal vetoed in 1832
c. was fundamental in helping the Federal Government finance the War of 1812
d. none of the above - ANSWERS✔-a. was disbanded in 1811 when it's charter
wasn't renewed
\.The public's fear of centralized power and distrust of moneyed interests led to
the demise of the first
two experiments in central banking:
, a. the First Bank of the United States and the Second Bank of the United States.
b. the First Bank of the United States and the Central Bank of the United States.
c. the First Central Bank of the United States and the Second Central Bank of the
United States.
d. the First Bank of North America and the Second Bank of North America -
ANSWERS✔-a. the First Bank of the United States and the Second Bank of the
United States.
\.The financial panic of 1907 resulted in such widespread bank failures and
substantial losses to
depositors that the American public finally became convinced that
a. the First Bank of the United States had failed to serve as a lender of last resort.
b. the Second Bank of the United States had failed to serve as a lender of last
resort.
c. the Federal Reserve System had failed to serve as a lender of last resort.
d. a central bank was needed to prevent future panics - ANSWERS✔-d. a central
bank was needed to prevent future panics
\.The Fed's support of the Depository Institutions Deregulation and Monetary
Control Act of 1980
stemmed in part from its
a. concern over declining Fed membership.
b. belief that all banking regulations should be eliminated.
c. belief that interest rate ceilings were too high.
