QUESTION 31 The Board of Governors of the Federal Reserve System is composed of

Question

QUESTION 31

The Board of Governors of the Federal Reserve System is

composed of seven members who are appointed by the President and approved by the Senate.

composed of 12 members of the Senate and the U.S. House of Representatives.

elected by the general public.

composed of representatives from the country's 12 largest commercial banks.

1.11 points   

QUESTION 32

The Fed is said to be the "lender of last resort" in that

it charges a higher interest rate to borrowers than does any other bank.

it functions as the government's bank only when commercial banks fail to do so.

it makes loans to individuals whom commercial banks do not believe are credit-worthy.

it stands ready to lend to any depository institution that it has decided should not fail.

1.11 points   

QUESTION 33

The Federal Reserve System acts as the government's fiscal agent by

providing checking account services for the government.

preparing the budget the President presents to Congress every year.

determining how to finance a deficit.

auditing taxpayers.

1.11 points   

QUESTION 34

The Federal Reserve System was established in which year?

1913.

1929.

1865.

1941.

1.11 points   

QUESTION 35

By serving as the lender of last resort,

the Fed provides check clearing services.

the Fed aids in the sale of government securities.

the Fed supervises depository institutions.

the Fed can prevent bank failures.

1.11 points   

QUESTION 36

Depository institutions must

use and pay for the services of the Federal Reserve System.

set their interest rates according to schedules established by the Federal Reserve System.

keep a certain percentage of their deposits as reserves.

turn over a percentage of their profits to the Federal Reserve System as payment for services provided by the Fed.

1.11 points   

QUESTION 37

The Federal Reserve System has

50 district banks.

24 district banks.

12 district banks.

7 district banks.

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QUESTION 38

The part of the Federal Reserve System (the Fed) that holds the reserve balances of depository institutions is

the Board of Governors.

the Federal Advisory Committee.

the Federal Open Market Committee.

the Federal Reserve district banks.

1.11 points   

QUESTION 39

The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a

systemic risk.

liquidity risk.

lending risk.

moral hazard.

1.11 points   

QUESTION 40

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

fiat money banking.

required reserve banking.

fractional reserve banking.

central banking system.

1.11 points   

QUESTION 41

Total reserves of private banks are

all customer deposits.

the minimum amount banks need to hold against time deposits.

federal reserve notes.

deposits held at the Fed and vault cash.

1.11 points   

QUESTION 42

A statement of assets and liabilities of any business entity is called

a cash flow statement.

an income statement.

a balance sheet.

a statement of net worth.

1.11 points   

QUESTION 43

Which of the following actions has no effect on the total money supply?

The Federal Open Market Committee buys government securities.

There is a transfer of deposits from one bank to another bank.

There is change in the money multiplier.

The Federal Open Market Committee sells government securities.

1.11 points   

QUESTION 44

Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

$80.

$0.

$400.

$20.

1.11 points   

QUESTION 45

The Federal Open Market Committee has responsibility for

appointing members to the Board of Governors of the Federal Reserve system.

issuing orders to buy or sell government securities for the Fed.

advising the Treasury Department on monetary policy.

printing money.

composed of seven members who are appointed by the President and approved by the Senate.

composed of 12 members of the Senate and the U.S. House of Representatives.

elected by the general public.

composed of representatives from the country's 12 largest commercial banks.

Explanation / Answer

QUESTION 31

The Board of Governors of the Federal Reserve System is composed of seven members who are appointed by the President and approved by the Senate.

QUESTION 32

The Fed is said to be the "lender of last resort" in that it stands ready to lend to any depository institution that it has decided should not fail. ( In emergencies , it extends loans to solvent but illiquid depository institutions whose failure to obtain credit would have a destabilizing effect on the national or regional economy )

QUESTION 33

The Federal Reserve System acts as the government's fiscal agent by providing checking account services for the government. ( the Reserve Bank  receive bids for auctions of Treasury securities to finance the debt and issue the securities in book-entry form ).

QUESTION 34

The Federal Reserve System was established in which year?

1913. ( December 23, 1913 )

QUESTION 35

By serving as the lender of last resort, the Fed supervises depository institutions.( The lender of last resort functions both to protect individuals who have deposited funds, and to prevent panic withdrawing from banks who have temporary limited liquidity)

QUESTION 36

Depository institutions must keep a certain percentage of their deposits as reserves. ( Reserve requirements are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities.)

QUESTION 37

The Federal Reserve System has 12 district banks. ( For the purpose of carrying out these day-to-day operations of the Federal Reserve System, the nation has been divided into twelve Federal Reserve Districts, with Banks in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.)

QUESTION 38

The part of the Federal Reserve System (the Fed) that holds the reserve balances of depository institutions is the Federal Reserve district banks.

QUESTION 39

The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a systemic risk.

QUESTION 40

A system in which depository institutions hold reserves that are less than the amount of total deposits is called Fractional-reserve banking .( the practice whereby a bank accepts deposits, makes loans or investments, and holds reserves that are a fraction of its deposit liabilities. )

QUESTION 41

Total reserves of private banks are deposits held at the Fed and vault cash. ( Bank reserves' or 'central bank reserves' are banks' holdings of deposits in accounts with their central bank  plus currency that is physically held in the bank's vault )

QUESTION 42

A statement of assets and liabilities of any business entity is called a balance sheet.

QUESTION 43

Which of the following actions has no effect on the total money supply? There is a transfer of deposits from one bank to another bank. ( since all banks follows the same banking standards, so there will be no effect on money supply if reserves are just transferred from one bank to another bank )

QUESTION 44

Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of $80.

QUESTION 45

The Federal Open Market Committee has responsibility for issuing orders to buy or sell government securities for the Fed.

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