ECO 316 Week 4 Chapter 19 Organization of Central Banks

This paperwork of ECO 316 Week 4 Chapter 19 Organization of Central Banks shows the solutions to the following problems:

19.1 Multiple Choice Questions

1) In October 2005, President Bush nominated which of the following to be chair of the Federal Reserve?

2) Who is Alan Greenspan?

3) Who is Trichet?

4) Why has the Federal Reserve chairman often been called the second most important person in the nation?

5) Who organized the Bank of the United States?

6) Which groups were opposed to the Bank of the United States?

7) Which president failed to re the charter of the Second Bank of the United States?

8) The movement to set up a central bank in the United States was spurred by the financial panic that occurred in

9) Who had served as a de facto lender of last resort during the 1907 panic?

10) The National Monetary Commission

11) When did the Federal Reserve Act become law?

12) Which of the following is NOT a way in which power was divided up in the Federal Reserve System?

13) Which of the following is NOT considered one of the four principal groups in the Federal Reserve System?

14) In 1913, Congress and the President did not envision that the Fed would control

15) How many Federal Reserve districts are there?

16) Which of the following cities contains a Federal Reserve bank?

17) Which of the following cities does NOT contain a Federal Reserve bank?

18) Which of the following Federal Reserve district banks was NOT a major population center at the time the Fed was created?

19) Federal Reserve districts

20) Who owns the Federal Reserve banks?

21) Which best describes the Federal Reserve district banks?

22) Which of the following statements is correct?

23) The members of Federal Reserve district bank boards of directors who are bankers are known as

24) The members of Federal Reserve district bank boards of directors who represent the public interest are known as

25) The members of Federal Reserve district bank boards of directors who are leaders in industry, commerce, and agriculture are known as

26) The members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as

27) Which of the following is NOT an activity carried out by Federal Reserve district banks?

28) The Federal Reserve district banks

29) Federal Reserve banks perform all of the following roles EXCEPT

30) What is the name of the entity, composed of Federal Reserve district bankers, that consults on monetary policy?

31) Under the Federal Reserve Act, which banks must be members of the Federal Reserve System?

32) What percentage of all banks in the United States belong to the Federal Reserve System?

33) Why did fewer state banks choose to become or remain members of the Federal Reserve System during the 1960s and 1970s?

34) The reserve tax refers to

35) The Depository Institutions Deregulation and Monetary Control Act of 1980

36) Which of the following statements about the Depository Institutions Deregulation and Monetary Control Act of 1980 is NOT correct?

37) About how many banks are Federal Reserve System members?

38) Members of the Board of Governors are

39) Members of the Board of Governors

40) Which of the following men has NOT served as Chairman of the Board of Governors?

41) What is the length of a term for the Chairman of the Board of Governors?

42) The margin requirement set by the Federal Reserve is the

43) Which of the following is NOT a responsibility of the Board of Governors?

44) The beige book is prepared by

45) The national economic forecast for the next two years prepared by the staff of the Board of Governors is published in the

46) The Chairman of the Federal Open Market Committee is also

47) The president of which Federal Reserve bank is always a member of the Federal Open Market Committee?

48) To conduct open market operations, the FOMC issues a directive to

49) The Banking Acts of 1933 and 1935

50) The Treasury was in conflict with Alan Greenspan early in the Bush administration because the Treasury

51) Most Fed watchers believe that the Fed is

52) Member banks

53) Elections to the boards of directors of Federal Reserve district banks

54) According to Sherman Maisel's experience, the most powerful group in the Fed, apart from the chairman of the Board of Governors, is

55) Which of the following statements is correct?

56) The Fed does not have to go through the normal congressional appropriations process because

57) What is the main reason the Fed operates in a political arena?

58) All of the following help make the Fed independent of the political process EXCEPT

59) Most of the Fed's earnings come from

60) Which of the following statements is correct?

61) Governors of the Fed often do not serve their full fourteen-year terms because

62) A chairman of the Board of Governors who is not reappointed

63) House Concurrent Resolution 133

64) The Humphrey-Hawkins Act

65) The man appointed as Fed chairman by President Carter in July 1979 to lead the fight against inflation was

66) In 1979, President Carter hoped to appoint a Fed chairman who would bring down inflation, thus helping President Carter to be reelected in 1980. In this respect, President Carter was

67) During World War II

68) In the early post-war years, the Fed was reluctant to continue its wartime agreement with the Treasury because it believed the result would be

69) Which chairman of the Board of Governors was not reappointed by President Truman in 1948 as a result of a conflict between the Fed and the Treasury?

70) During the early 1980s, Paul Volcker argued that the Fed could not

71) The public interest view of Fed motivation holds that the Fed acts in the interest of

72) Which of the following appears to be evidence against the public interest view of the Fed's motivation?

73) The principal-agent view of Fed motivation predicts that the Fed acts

74) The political business cycle theory predicts that

75) The facts show that the political business cycle theory

76) Why might Congress benefit from the Fed being self-financed?

77) The issue of Fed independence is most often raised by

78) The main argument in favor of Fed independence is that

79) The main argument against Fed independence is that

80) Apart from the United States, in countries where central bank board members serve fixed terms of office,

81) Which central bank gained the power to set interest rates independent of the government in the late 1990s?

82) Generally,

19.2 Essay Questions

1) Suppose the First National Bank pays 6.5% interest on checkable deposits and that the required reserve ratio is 10%. What is First National Bank's effective cost of funds?

2) Discuss the implications of the Fed's lacking of a constitutional mandate.

3) The text states that: "Few countries have as complex a structure for their central bank as the United States has in its Federal Reserve System." Why does the Fed have such a complex structure?

4) Under what circumstances might a private lender of last resort, such as the York Clearing House in the years before the founding of the Fed, be effective? Under what circumstances would a private lender of last resort be ineffective?