Download Finance 310: Homework 1

Acc/ManEc 453: Homework 18
Part I. Multiple Choice
1. Which of the following is not a responsibility of a Regional Federal Reserve Bank?
A) Destroy old currency
B) Determine regional fiscal policy
C) Hold reserves
D) Make discount loans at the discount rate
2. How long is the term of each member of the Board of Governors?
A) 4 years
B) 8 years
C) 10 years
D) 14 years
3. How long is the term of the Board Chairman?
A) 4 years
B) 8 years
C) 10 years
D) 14 years
4. Open market operations in the United States are conducted by
A) staff at the Federal Reserve Bank of New York
B) staff at Board of Governors in Washington D.C.
C) staff at any and all Regional banks
D) staff at Regional banks with current voting power on FOMC
5. The central bank of the United States was first created by
A) Glass-Steagall Act of 1933
B) The Federal Reserve Act of 1914
C) Banking Act of 1935
D) McFadden Act of 1927
6. Who appoints the board of directors of regional banks?
A) Congress
B) Private Banks
C) The Board of Governors
D) Private Banks and the Board of Governors
7. Monetary policy is determined by
A) The Board of Governors
B) The 12 Federal Reserve Banks
C) The Federal Open Market Committee
D) The Federal Reserve Advisory Committee
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8. The Federal Reserve is remarkably free from political pressure because
A) It has an independent source of revenue
B) Its structure cannot be changed by Congress through legislation
C) Members of the Board of Governors serve lifetime appointments
D) The chairman of the board of governors is appointed by the Federal Reserve
Bank presidents
9. While the Fed enjoys a relatively high degree of independence for a government
agency, it feels political pressure from the president and Congress because
A) Congress must reappoint Fed Governors every three years
B) The Fed must go to Congress each year for operating revenues
C) Congress could limit Fed power through legislation
D) The president can dismiss a Fed Governor at any time.
10. Greater central bank independence is associated with
A) Lower inflation and lower unemployment
B) Lower inflation and no change in unemployment
C) Lower inflation and higher unemployment
D) No change in either unemployment or inflation
11. During Eccles’ tenure as Fed Governor, the reason the White House wanted to keep
rates low was to
A) Facilitate the implementation of further policies similar to the “New Deal”
B) Lower the unemployment rate
C) Facilitate war-debt funding
D) Stabilize the financial system
12. The battle for Fed independence was between
A) Eccles and Truman
B) Eccles and Roosevelt
C) Eccles and Carter
D) Eccles and Eisenhower
13. In response to the White House demand that rates be kept low, Eccles
A) Lobbied congress for legislative reform
B) Made public the notes of the meeting
C) Made concessions to the White House
D) Resigned his position
Part II. Free Response
1. List the twelve voting members of the FOMC
2. While the Chairman of the Federal Reserve Board has only one of 12 votes on the
FOMC, what gives him power to control the committee?
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3. Go to the Federal Reserve Board's web site and locate the FOMC’s most recent
statement, October 31, 20071. What did the Committee members say at their last
meeting regarding the two goals of price stability and sustainable economic growth?
What is their current assessment of the balance of risks? Now read the committee’s
statement as of September 18th and report how some views have changed.
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Click on “news and events”, “press releases”, “monetary policy”.
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