Money an Economic Activity Exam 2

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Exam II Money and Economic Activity Name___________________________________ Fall 2012

Part I: MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1)

What makes the Federal Reserve so unique compared to other central banks around the world is its

1)

________

A)

centralized structure.

B)

decentralized structure.

C)

monetary policy functions.

D)

regulatory functions.

2)

Which of the following is an entity of the Federal Reserve System?

2)

________

A)

The U.S. Treasury Secretary

B)

The FDIC

C)

The Comptroller of the Currency

D)

The FOMC

3)

The Federal Reserve Bank of ________ plays a special role in the Federal Reserve System because it houses the open market desk.

3)

________

A)

Chicago

B)

Boston

C)

New York

D)

San Francisco

4)

The ability of a central bank to set monetary policy goals is

4)

________

A)

policy independence.

B)

instrument independence.

C)

political independence.

D)

goal independence.

5)

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

5)

________

A)

withhold appropriations from the Federal Open Market Committee.

B)

propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies.

C)

withhold appropriations from the Board of Governors.

D)

instruct the General Accounting Office to audit the foreign exchange market functions of the Federal Reserve.

6)

The case for Federal Reserve independence does not include the idea that

6)

________

A)

a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced.

B)

policy is always performed better by an elite group such as the Fed.

C)

political pressure would impart an inflationary bias to monetary policy.

D)

a politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level.

7)

The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures would impart

7)

________

A)

a countercyclical bias to monetary policy.

B)

a disinflationary bias to monetary policy.

C)

an inflationary bias to monetary policy.

D)

a deflationary bias to monetary policy.

8)

The government agency that oversees the banking system and is responsible for the conduct of monetary policy in the United States is

8)

________

A)

the United States Treasury.

B)

the U.S. Gold Commission.

C)

the Federal Reserve System.

D)

the House of Representatives.

9)

Of the three players in the money supply process, most observers agree that the most important player is

9)

_________

A)

the FDIC.

B)

the United States Treasury.

C)

the Office of Thrift Supervision.

D)

the Federal Reserve System.

10)

Both ________ and ________ are Federal Reserve assets.

10)

______

A)

currency in circulation; securities

B)

securities; loans to financial institutions

C)

currency in circulation; reserves

D)

securities; reserves

11)

The monetary base consists of

11)

______

A)

currency in circulation and reserves.

B)

reserves and Federal Reserve Notes.

C)

currency in circulation and the U.S. Treasury's monetary liabilities.

D)

currency in circulation and Federal Reserve notes.

12)

Total reserves are the sum...
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