Deck 14: Central Bank Form and Function

Question 1

The Governing Council of the ECB has the same function as the FOMC of the Fed.

Answer 1

True

Question 2

The first central bank of the United States failed because of a lack of independence.

Answer 2

False

Question 3

The panic of 1907 led to the chartering of the current Federal Reserve.

Answer 3

True

Question 4

Under the gold standard, it is not necessary for a central bank to control the money supply.

Question 5

A country with a specie standard does not need a central bank to control the money supply.

Question 6

A country with a fixed exchange rate does not need a central bank to control the money supply.

Question 7

The ECB is more independent than the Federal Reserve.

Question 8

There are 12 district banks in the Federal Reserve.

Question 9

The ECB runs monetary policy for Italy.

Question 10

The chairman of the Board of Governors is the person with the greatest influence on the conduct of monetary policy.

Question 11

One of the central banks in U.S. history was killed by Andrew Jackson.

Question 12

The national central banks within the ECB have more discretion over policy than district banks within the Federal Reserve.

Question 13

The district bank in New York has the job of clearing checks for all national banks.

Question 14

The chairman of the Board of Governors has sole discretion on changes in the money supply.

Question 15

There was a period of time when the United States did not have a central bank.

Question 16

The FRBNY has the job of conducting open market operations.

Question 17

District banks of the Federal Reserve have little influence on the money supply and interest rates.

Question 18

Countries with independent central banks tend to have higher inflation.

Question 19

The ECB runs monetary policy for Norway.

Question 20

Under the gold standard, regulators have no control over the money supply.

Question 21

The structure of the ECB was modeled on the Bank of England.

Question 22

The Bank of the United States was chartered in the

A) 1700s.
B) 1800s.
C) 1900s.
D) 2000s.

Question 23

How many members (including the chairman) are there on the Federal Reserve Board of Governors?

A) 5
B) 12
C) 50
D) none of the above

Question 24

The Federal Reserve was originally chartered so that the government could control the money supply.

Question 25

The Bank of Japan has a unitary structure.

Question 26

For what period of time was the United States without a central bank?

A) 1776-1864
B) 1837-1914
C) 1919-1944
D) none of the above

Question 27

The creation of the Federal Reserve was spurred by the financial panic of 1792.

Question 28

The Federal Reserve began operations in

A) 1776.
B) 1892.
C) 1914.
D) 1945.

Question 29

Deflation (negative inflation) helps firms in debt.

Question 30

Dollarization is equivalent to a gold standard.

Question 31

The Federal Reserve is considered to be independent since it has its own source of funds.

Question 32

The Executive Board makes decisions about changes in the money supply for the ECB.

Question 33

What private sector agent once acted as a lender of last resort for the U.S. government?

A) J.P. Morgan
B) Henry Ford
C) John D. Rockefeller
D) all of the above

Question 34

How many different central banks has the United States had in its history?

A) 1
B) 2
C) 3
D) 4

Question 35

The Federal Reserve is considered to be independent since it cannot be affected by Congressional legislation.

Question 36

The FRBNY safeguards much of the world's gold.

Question 37

The Federal Reserve is considered to be independent since members of the Board of Governors are appointed for longer terms than any elected officials.

Question 38

The independence of central banks is ranked on a scale of 1 to 10.

Question 39

How many districts are there in the Federal Reserve?

A) 12
B) 50
C) 435
D) none of the above

Question 40

The ECB is part of a larger system, the ESCB.

Question 41

Which of the following is NOT a function of the Federal Reserve?

A) conduct economic research
B) adjust tax policy
C) control the money supply
D) all of the above

Question 42

Who of the following always serve on the FOMC?

A) the Chairman of the Board of Governors
B) the Board of Governors
C) the President of the FRBNY
D) all of the above

Question 43

Unanticipated inflation

A) redistributes resources from net creditors to net debtors.
B) creates uncertainty.
C) both a and b.
D) none of the above.

Question 44

Which of the following is NOT a function of the Federal Reserve?

A) conduct economic research
B) regulate brokers and insurance companies
C) evaluate bank mergers
D) all of the above.

Question 45

Which function was the Federal Reserve originally designed to perform?

A) control the money supply
B) clearing checks
C) acting as lender of last resort
D) all of the above

Question 46

The Federal Reserve is considered independent because

A) it has its own source of funds.
B) the terms of the Board of Governors is longer than the President's.
C) the chairman cannot be fired by Congress.
D) all of the above.

Question 47

Who of the following always serve on the FOMC?

A) the President of the United States
B) the President of the FRBDC
C) The President of the FRBNY
D) all of the above

Question 48

Which of the following are functions of a central bank?

A) regulating banks
B) clearing checks
C) acting as lender of last resort
D) all of the above

Question 49

Which of the following makes policy decisions about open market operations?

A) FOMC
B) FRBNY
C) Board of Governors
D) none of the above

Question 50

A country loses the ability to conduct discretionary control of the money supply when it
a) uses a floating exchange rate.
b) engages in dollarization.
c) uses fiat money.
d) all of the above.

Question 51

Which of the following are goals of the Federal Reserve?

A) price stability
B) stable output growth
C) stable financial system
D) all of the above

Question 52

A country loses the ability to conduct discretionary control of the money supply when it
a) uses a fixed exchange rate.
b) engages in dollarization.
c) uses a gold standard.
d) all of the above.

Question 53

When a country uses a foreign currency as its medium of exchange, it is using

A) monetarization.
B) dollarization.
C) a dirty float.
D) none of the above.

Question 54

Which tool does the Fed use most commonly to increase the money supply?

A) increase discount lending
B) raise the reserve requirement
C) changing deposit insurance requirements
D) none of the above

Question 55

What does the Fed do that the ECB does not?

A) control interest rates
B) regulate banks
C) make loans
D) none of the above

Question 56

Which tool does the Fed use most commonly to control the money supply?

A) changing the discount rate
B) changing the reserve requirement
C) open market operations
D) none of the above

Question 57

Outside of the US and ECB, how are most banks structured?

A) With a Board of Governors
B) As a unit bank
C) As districts with the central bank in the capital city
D) none of the above

Question 58

Which of the following is NOT a function of the Federal Reserve?

A) issuing bonds
B) controlling the money supply
C) examining bank holding companies
D) all of the above

Question 59

The Federal Reserve and the European Central Bank are exceptional among central banks due to

A) their independence.
B) their concern about inflation.
C) their involvement in government spending decisions.
D) none of the above.

Question 60

Which of the following are goals of the Federal Reserve?

A) low, stable inflation
B) predictable value of the currency
C) avoiding deflation
D) all of the above

Question 61

What is dollarization?

Question 62

Why is the ECB considered to be slightly more independent than the Federal Reserve?

Question 63

Which of the Federal Reserve district banks is the most important and why?

Question 64

You read on a blog, "China's currency board decided to lower interest rates to stimulate their economy." How do you know this is inaccurate?

Question 65

Which state has two federal reserve district banks?

A) New York
B) Texas
C) California
D) Missouri

Question 66

Which of the following are costs of high and/or unexpected inflation?

A) increased uncertainty
B) lower real interest rates
C) hurts indebted firms
D) all of the above

Question 67

Which of the following central banks has a unitary structure?

A) Bank of Canada
B) Bank of Japan
C) Bank of England
D) all of the above

Question 68

What event led to the chartering of the Federal Reserve?

Question 69

The group within the ECB that has the analogous function as the Board of Governors in the Federal Reserve is

A) the Governing Board.
B) the Executive Board.
C) the FOMC.
D) none of the above.

Question 70

What convinced many Americans to create a new central bank after Andrew Jackson acted as the lender of last resort?

Question 71

The group that makes decisions about the conduct of monetary policy for the ECB is

A) the Governing Council.
B) the FOMC.
C) the Executive Board.
D) none of the above.

Question 72

Independence of a central bank refers to independence from

A) foreign influence.
B) the bond market.
C) other parts of the government.
D) all of the above.

Question 73

Name the primary regulatory function conducted by the Federal Reserve but not the ECB.

Question 74

Which of the following central banks has a unitary structure?

A) Bank of Canada
B) Federal Reserve
C) ECB
D) all of the above

Question 75

What body within the Federal Reserve makes decisions about changes in interest rates? Who comprises this group?