Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 14 Central Banks: A Global Perspective
14.1 Origins of the Federal Reserve System
1) The First Bank of the United States
A) was disbanded in 1811 when its charter was not 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. Answer: A
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2) The Second Bank of the United States
A) was disbanded in 1811 when its charter was not renewed. B) had its charter renewal vetoed in 1832.
C) is considered to be the primary cause of the bank panic of 1907. D) None of the above. Answer: B
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3) The public's fear of centralized power and distrust of moneyed interests led to the demise of the first two experiments in central banking, otherwise known as
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. Answer: A
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4) 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. Answer: D
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5) What makes the Federal Reserve so unique compared to other central banks around the world is its
A) centralized structure. B) decentralized structure. C) regulatory functions.
D) monetary policy functions. Answer: B
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14.2 Structure of the Federal Reserve System
1) Which of the following is NOT an entity of the Federal Reserve System? A) Federal Reserve Banks
B) the Comptroller of the Currency C) the Board of Governors
D) the Federal Open Market Committee Answer: B
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2) Which of the following is an entity of the Federal Reserve System? A) the U.S. Treasury Secretary B) the FOMC
C) the Comptroller of the Currency D) the FDIC Answer: B
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3) The three largest Federal Reserve banks (New York, Chicago, and San Francisco) combined hold more than ________ percent of the assets of the Federal Reserve System. A) 25 B) 33 C) 50 D) 67
Answer: C
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4) The Federal Reserve Banks are ________ institutions since they are owned by the ________. A) quasi-public; private commercial banks in the district where the Reserve Bank is located B) public; private commercial banks in the district where the Reserve Bank is located C) quasi-public; Board of Governors D) public; Board of Governors Answer: A
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5) Each Federal Reserve bank has nine directors. Of these ________ are appointed by the member banks and ________ are appointed by the Board of Governors. A) three; six B) four; five C) five; four D) six; three Answer: D
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6) The nine directors of the Federal Reserve Banks are split into three categories: ________ are professional bankers, ________ are leaders from industry, and ________ are to represent the public interest and are not allowed to be officers, employees, or stockholders of banks. A) 5; 2; 2 B) 2; 5; 2 C) 4; 2; 3 D) 3; 3; 3 Answer: D
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7) Member commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock is limited by law to ________ percent annually. A) four B) five C) six D) eight Answer: C
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8) The Federal Reserve Bank of ________ houses the open market desk. A) Boston B) New York C) Chicago
D) San Francisco Answer: B
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9) The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee? A) Philadelphia B) Boston
C) San Francisco D) New York Answer: D
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10) An important function of the regional Federal Reserve Banks is A) setting reserve requirements. B) clearing checks.
C) determining monetary policy. D) setting margin requirements. Answer: B
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11) Which of the following functions is NOT performed by any of the twelve regional Federal Reserve Banks? A) check clearing
B) conducting economic research
C) setting interest rates payable on time deposits D) issuing new currency Answer: C
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12) All ________ are required to be members of the Fed. A) state chartered banks
B) national banks chartered by the Office of the Comptroller of the Currency C) banks with assets less than $100 million D) banks with assets less than $500 million Answer: B
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13) Of all commercial banks, about ________ belong to the Federal Reserve System. A) 10% B) one half C) one third D) 90% Answer: C
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14) Prior to 1980, member banks left the Federal Reserve System due to A) the high cost of discount loans. B) the high cost of required reserves.
C) a desire to avoid interest rate regulations. D) a desire to avoid credit controls. Answer: B
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15) 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.
D) belief that depositors had to become more knowledgeable of banking operations. Answer: A
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16) Banks subject to reserve requirements set by the Federal Reserve System include A) only nationally chartered banks.
B) only banks with assets less than $100 million. C) only banks with assets less than $500 million.
D) all banks whether or not they are members of the Federal Reserve System. Answer: D
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17) The Depository Institutions Deregulation and Monetary Control Act of 1980 A) established higher reserve requirements for nonmember than for member banks. B) established higher reserve requirements for member than for nonmember banks. C) abolished reserve requirements.
D) established uniform reserve requirements for all banks. Answer: D
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18) There are ________ members of the Board of Governors of the Federal Reserve System. A) 5 B) 7 C) 12 D) 19
Answer: B
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19) Members of the Board of Governors are
A) chosen by the Federal Reserve Bank presidents.
B) appointed by the newly elected president of the United States, as are cabinet positions. C) appointed by the president of the United States and confirmed by the Senate. D) never allowed to serve more than 7-year terms. Answer: C
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20) Each governor on the Board of Governors can serve A) only one nonrenewable fourteen-year term.
B) one full nonrenewable fourteen-year term plus part of another term. C) only one nonrenewable eight-year term.
D) one full nonrenewable eight-year term plus part of another term. Answer: B
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