©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
FIN 470 Exam #1 Practice Questions and
Answers
What entities in the Federal Reserve System Set the Discount Rate? - Ans:✔✔-The directors of the 12
district banks set the discount rate and decide which banks can obtain discount loans.
What entities in the Federal Reserve System Set the Reserve Requirement? - Ans:✔✔-The 7 member
Board of Governors (who are elected by the president) set the reserve requirement.
What entities in the Federal Reserve System Conduct Open Market Operations? - Ans:✔✔-The Federal
Open Market Committee, comprised of the Board of Governors and 5 District presidents.
What is a necessary condition for a barter system to work? - Ans:✔✔-For a transaction to occur in a
barter economy, both sides of the transaction must want or need the goods or services offered by the
other party
What is the composition of the Federal Open Market Committee (FOMC)? In other words,how many
district presidents and how many board of governors? - Ans:✔✔-The FOMC is composed of 7 Board of
Governors and 5 District Presidents (one always being the New York Fed President),with the Board of
Governors having the majority of votes.
Page 1/40
, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
- Within the FOMC, the chairman advises the President on economic policy, testifiesto Congress, and
speaks for the Federal Reserve
-Additionally, the FOMC conducts Open Market Operations
What are the three functions of money? - Ans:✔✔--Unit of Account:
Money is important because of its ability to measure value in the economy.
In order to make a decision about something, you need to quantify it.
-Medium of Exchange:
Money in the form of currency or checks that is used to pay for goods or services.
Allows market participants to translate their comparative advantage into an exchangeable good or
service.
-Store of Value:
Repository of purchasing power over time.
Used to "save" purchasing power from the time income is received and when it is spent.
Page 2/40
, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
What is the Barter System? - Ans:✔✔--Method of exchanging goods and services directly.
-Difficult to translate into specific needs and wants.
-Skill must be beneficial to a specific group that has something you want.
What is Commodity Money? - Ans:✔✔--Money made up of precious metals or another valuable
commodity.
-Difficult to transport and carry.
Who falls into Category A for the Federal Reserve District Banks? - Ans:✔✔-Three professional bankers
are elected as directors by member banks.
Who falls into Category B for the Federal Reserve District Banks? - Ans:✔✔-Three prominent leaders of
industry (labor, agriculture, etc.) are elected as directors by member banks.
Who falls into Category C for the Federal Reserve District Banks? - Ans:✔✔-Category C - Three directors
are appointed by the Board of Governors to represent public interest. Not allowed to be officers,
employees or stockholders of banks.
What are the four tools used by the Federal Reserve to implement monetary policy? Label the ceiling
and floor for monetary policy - Ans:✔✔--Open Market Operations
-Discount Rate (ceiling)
Page 3/40
, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
-Reserve Requirements
-Interest on Reserves (Floor)
The price of Bitcoin exemplifies which function of money? - Ans:✔✔-Unit of account.
Who is the current chairperson of the FOMC? - Ans:✔✔-The current chairperson of the FOMC is Jerome
Powell. He is in the first year of asecond four year term.
How can the Federal Reserve lower the Federal Funds Rate without changing the MoneySupply? -
Ans:✔✔-They can decrease the required reserve
For the given scenario, explain the shift(s) in Demand, Supply, Federal Funds Rate (FFR) and Money
Supply (MS):
The Fed decreases reserve requirements: - Ans:✔✔--Demand shifts left
-Supply does not change
-FFR goes down
-Money supply does not change
For the given scenario, explain the shift(s) in Demand, Supply, Federal Funds Rate (FFR) and Money
Supply (MS):
Page 4/40
FIRST PUBLISH OCTOBER 2024
FIN 470 Exam #1 Practice Questions and
Answers
What entities in the Federal Reserve System Set the Discount Rate? - Ans:✔✔-The directors of the 12
district banks set the discount rate and decide which banks can obtain discount loans.
What entities in the Federal Reserve System Set the Reserve Requirement? - Ans:✔✔-The 7 member
Board of Governors (who are elected by the president) set the reserve requirement.
What entities in the Federal Reserve System Conduct Open Market Operations? - Ans:✔✔-The Federal
Open Market Committee, comprised of the Board of Governors and 5 District presidents.
What is a necessary condition for a barter system to work? - Ans:✔✔-For a transaction to occur in a
barter economy, both sides of the transaction must want or need the goods or services offered by the
other party
What is the composition of the Federal Open Market Committee (FOMC)? In other words,how many
district presidents and how many board of governors? - Ans:✔✔-The FOMC is composed of 7 Board of
Governors and 5 District Presidents (one always being the New York Fed President),with the Board of
Governors having the majority of votes.
Page 1/40
, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
- Within the FOMC, the chairman advises the President on economic policy, testifiesto Congress, and
speaks for the Federal Reserve
-Additionally, the FOMC conducts Open Market Operations
What are the three functions of money? - Ans:✔✔--Unit of Account:
Money is important because of its ability to measure value in the economy.
In order to make a decision about something, you need to quantify it.
-Medium of Exchange:
Money in the form of currency or checks that is used to pay for goods or services.
Allows market participants to translate their comparative advantage into an exchangeable good or
service.
-Store of Value:
Repository of purchasing power over time.
Used to "save" purchasing power from the time income is received and when it is spent.
Page 2/40
, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
What is the Barter System? - Ans:✔✔--Method of exchanging goods and services directly.
-Difficult to translate into specific needs and wants.
-Skill must be beneficial to a specific group that has something you want.
What is Commodity Money? - Ans:✔✔--Money made up of precious metals or another valuable
commodity.
-Difficult to transport and carry.
Who falls into Category A for the Federal Reserve District Banks? - Ans:✔✔-Three professional bankers
are elected as directors by member banks.
Who falls into Category B for the Federal Reserve District Banks? - Ans:✔✔-Three prominent leaders of
industry (labor, agriculture, etc.) are elected as directors by member banks.
Who falls into Category C for the Federal Reserve District Banks? - Ans:✔✔-Category C - Three directors
are appointed by the Board of Governors to represent public interest. Not allowed to be officers,
employees or stockholders of banks.
What are the four tools used by the Federal Reserve to implement monetary policy? Label the ceiling
and floor for monetary policy - Ans:✔✔--Open Market Operations
-Discount Rate (ceiling)
Page 3/40
, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
-Reserve Requirements
-Interest on Reserves (Floor)
The price of Bitcoin exemplifies which function of money? - Ans:✔✔-Unit of account.
Who is the current chairperson of the FOMC? - Ans:✔✔-The current chairperson of the FOMC is Jerome
Powell. He is in the first year of asecond four year term.
How can the Federal Reserve lower the Federal Funds Rate without changing the MoneySupply? -
Ans:✔✔-They can decrease the required reserve
For the given scenario, explain the shift(s) in Demand, Supply, Federal Funds Rate (FFR) and Money
Supply (MS):
The Fed decreases reserve requirements: - Ans:✔✔--Demand shifts left
-Supply does not change
-FFR goes down
-Money supply does not change
For the given scenario, explain the shift(s) in Demand, Supply, Federal Funds Rate (FFR) and Money
Supply (MS):
Page 4/40
