Federal Reserve interest rate decisions can be vetoed by the U.S. president or the Congress.

The Federal Reserve System is charged with

A.
regulating securities exchanges.

B.
conducting monetary policy.

C.
providing payment and other services to a variety of institutions.

D.
setting bank prime rates.

E.
conducting monetary policy and providing payment and other services to a variety of institutions.

Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand dropped, the Fed would likely ______________. If the Fed was instead targeting interest rates and money demand dropped, the Fed would likely _______________.

A.
increase the money supply; do nothing

B.
do nothing; decrease the money supply

C.
decrease the money supply; do nothing

D.
do nothing; increase the money supply

E.
increase the money supply; decrease the money supply

The Fed funds rate is the rate that

A.
banks charge for loans to corporate customers.

B.
banks charge to lend foreign exchange to customers.

C.
the Federal Reserve charges on emergency loans to commercial banks.

D.
banks charge each other on loans of excess reserves.

E.
banks charge securities dealers to finance their inventory.

The discount rate is the rate that

A.
banks charge for loans to corporate customers.

B.
banks charge to lend foreign exchange to customers.

C.
banks charge each other on loans of excess reserves.

D.
banks charge securities dealers to finance their inventory.

E.
the Federal Reserve charges on loans to commercial banks.

The Fed offers three types of discount window loans. ______________ credit is offered to small institutions with demonstrable patterns of financing needs, _____________ credit is offered for short-term temporary funds outflows, and _____________ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

A.
Seasonal; extended; adjustment

B.
Extended; adjustment; seasonal

C.
Adjustment; extended; seasonal

D.
Seasonal; primary; secondary

E.
Adjustment; seasonal; extended

Bank A has an increase in deposits of $20 million dollars and all bank reserve requirements are 10 percent. Bank A loans out the full amount of the deposit increase that is allowed. This amount winds up deposited in Bank B. Bank B lends out the full amount possible as well and this amount winds up deposited in Bank C. What is the total increase in deposits resulting from these three banks?

A.
$48.00 million

B.
$54.20 million

C.
$56.33 million

D.
$57.10 million

E.
$60.00 million

Recently, oil prices have risen in the United States, generating concerns that inflation may increase. If the Fed wishes to ensure that inflation does not get out of hand, the Fed could

A.
intervene in the currency markets to push the value of the dollar down.

B.
decrease the discount rate.

C.
lower the target Fed funds rate.

D.
lower the target money supply growth rate.

E.
reduce reserve requirements at banks.

If the Fed is targeting interest rates and money demand increases, an appropriate policy response would be to

A.
increase reserve requirements.

B.
increase the discount rate.

C.
buy U.S. Treasury securities from government bond dealers.

D.
increase government spending.

E.
none of the options

Only $35.99/year
In the area of bank supervision, which of the following are functions of the Federal Reserve Banks?

I. Examinations of state member banks
II. Approval of member bank and bank holding company acquisitions
III. Deposit insurance

A.
I only

B.
I and II only

C.
II and III only

D.
I and III only

E.
I, II, and III

The Check 21 Act, effective in October 2004, does which of the following?

A.
Allows bank customers to better take advantage of bank float

B.
Requires banks to immediately clear all customer deposits

C.
Prohibits the Fed from being involved in check clearing to prevent unfair competition with private check clearing agencies

D.
Authorizes the use of an electronic image to facilitate paperless check clearing

E.
Eliminates all fees on checking

A bank has $770 million in checkable deposits. The bank has $85 million in reserves. The bank’s required reserves are _____________ and its excess reserves are _____________.

A.
$85 million; $0

B.
$770 million; $85 million

C.
$89 million; $21 million

D.
$685 million; $8.5 million

E.
$77 million; $8 million