TEST BANK for Economic Development 11 all chapters 1-15, complete.pdf

TEST BANK for Economic
Development 11 all chapters 1-
15, complete.pdf
. The Board of Governors of the Federal Reserve serves on a larger policy-making
group called the House Banking Committee.
a. True
b. False - answers False

To expand the money supply the Fed could lower the required reserve ratio, lower the
discount rate, or purchase government securities.
a. True
b. False - answers True

The smaller the required reserve ratio, the larger the simple deposit multiplier.
a. True
b. False - answers True

Although the Fed can destroy money, it is impossible for the Fed to create money out of
thin air.
a. True
b. False - answers False

Members of the Board of Governors of the Federal Reserve are appointed by the
President and approved by the Senate to serve a 14-year term.
a. True
b. False - answers True

To decrease the money supply, the Fed may sell government securities or lower taxes.
a. True
b. False - answers False

The interest rate that the Fed charges when it lends reserves to banks is called the
federal funds rate.
a. True
b. False - answers False

To limit political influence on Fed policy, the terms of the Fed Board of Governors are
staggered so that one new appointment is made every four years to coincide with the
presidential elections.
a. True
b. False - answers False

,The Fed can change the federal funds rate by issuing an order, but it cannot change the
discount rate this way.
a. True
b. False - answers False

. The Fed is one of the largest departments within the U.S. Treasury.
a. True
b. False - answers False

Controlling the nation's money supply is the most important duty of the Federal
Reserve.
a. True
b. False - answers True

The president of the Federal Reserve District Bank of New York holds a permanent seat
on the Federal Open Market Committee.
a. True
b. False - answers True

There is an inverse relationship between the required reserve ratio and the money
supply.
a. True
b. False - answers True

The discount rate is sometimes also known as the primary credit rate.
a. True
b. False - answers True

. In 2007, the Fed began using an additional monetary policy tool called the term
auction facility program.
a. True
b. False - answers True

When the Federal Reserve system was being created, some people thought that there
should be as few district banks as possible to enhance efficiency and for ease of
operation.
a. True
b. False - answers True

The boundaries of the Federal Reserve districts were determined based on trade
patterns between cities.
a. True
b. False - answers True

The Federal Open Market Committee (FOMC) meets on the first Tuesday of each
month.

,a. True
b. False - answers False

When the Federal Open Market Committee (FOMC) votes on policy, it does so in the
following order: the chair votes first, the vice chair votes second, and the remaining
FOMC members vote based on their seniority at the Fed.
a. True
b. False - answers False

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver
money to a commercial bank that was experiencing a "mad run" on the bank.
a. True
b. False - answers True

When the Fed was created, its governing body was called the Federal Reserve Board,
but it was later officially renamed the Board of Governors of the Federal Reserve
System.
a. True
b. False - answers True

. Lowering the required reserve ratio raises the simple deposit multiplier.
a. True
b. False - answers True

The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds
rate.
a. True
b. False - answers False

A discount loan is a loan the Federal Reserve makes to a commercial bank.
a. True
b. False - answers True

To deal with the financial crisis of 2007-2009, the Fed extended its lender of last resort
function to include institutions other than banks.
a. True
b. False - answers True

Under free banking, banks are regulated by the Federal Reserve.
a. True
b. False - answers False

Both open market purchases and quantitative easing are directed at increasing reserves
in the banking system and increasing the money supply.
a. True
b. False - answers True

, The Federal Reserve System is the
a. federal government agency that collects taxes and spends these receipts on tanks,
bridges, government employees' salaries, etc.
b. company that delivers packages to your front door.
c. central bank of the United States.
d. federal government agency that collects and disseminates all the economic data that
economists are interested in. - answers c

The Federal Reserve System began operations in
a. 1834.
b. 1896.
c. 1914.
d. 1935. - answers c

The Board of Governors of the Federal Reserve is comprised of
a. seven persons, each appointed to a seven-year term.
b. seven persons, each appointed to a fourteen-year term.
c. fourteen persons, each appointed to a seven-year term.
d. twelve persons, each appointed to a seven-year term.
e. twelve persons, each appointed to a fourteen-year term. - answers b

The United States is divided into __________ Federal Reserve districts, each with a
district bank.
a. three
b. eight
c. twelve
d. twenty
e. fifty - answers c

The Board of Governors of the Federal Reserve is part of a larger policy-making group
called the
a. Senate Banking Committee.
b. Federal Deposit Insurance Corporation.
c. American Banking Association.
d. Federal Open Market Committee. - answers d

Which of the following is not a major responsibility of the Fed?
a. supplying the economy with paper money
b. providing check-clearing services
c. supervising member banks
d. serving as fiscal agent for the Treasury
e. All of the above are major responsibilities of the Fed. - answers e

Which of the following is not a major responsibility of the Fed?
a. controlling the money supply