Basic Economics 14th Edition By Frank V. Mastrianna – Test Bank

CHAPTER 11 The Federal Reserve and the Money Supply

EXAMINATION QUESTIONS

Multiple Choice

a 1. The First Bank of the United States was chartered by
a. the federal government
b. the state of New York
c. the city of New York
d. Suffolk County
d 2. During the so-called wildcat banking period in the United States,
a. there was no central authority in the U.S. banking system
b. abusive banking practices were prevalent
c. the National Banking System provided bank note security
d. both (a) and (b)
a 3. One problem associated with the National Banking System was
a. the perverse elasticity of the money supply
b. the tendency of bank reserves to stay in local communities
c. inadequate backing for national bank notes
d. excessive loans made to farmers
b 4. The Federal Reserve System was established in
a. 1980
b. 1913
c. 1864
d. 1791
b 5. If a bank has excess reserves,
a. its reserves are greater than its liabilities
b. it can make a loan if it wishes
c. it cannot make a loan if it wishes
d. it must borrow from the Fed
d 6. One reason the Federal Reserve System was set up was to
a. increase the safety of the U.S. banking system
b. provide the United States with a more flexible supply of currency
c. provide banking services for the federal government
d. all of the above
c 7. The Federal Reserve System is built around
a. 4 regional banks
b. 6 regional banks
c. 12 district banks
d. 1 bank with several branches
b 8. The present membership in the Federal Reserve System includes
a. all the commercial banks in the nation
b. less than half of the commercial banks in the nation
c. only the Federal Reserve Banks and their branches
d. commercial banks, savings & loans, and credit unions
b 9. Each Federal Reserve Bank
a. is directly responsible to the U.S. President
b. is controlled by its own Board of Governors
c. lacks autonomy
d. handles a district of equal geographic size
d 10. Which of the following is not a correct statement?
a. the United States has 12 Federal Reserve districts
b. less than one-half of U.S. private banks are members of the Federal Reserve System
c. the members of the Board of Governors of the Fed are appointed by the U.S. President for 14-year terms
d. the U.S. Senate must approve any major change in Fed policy
b 11. The Board of Governors of the Federal Reserve System has
a. 6 members
b. 7 members
c. 1 member from each Federal Reserve Bank
d. 20 members
b 12. Members of the Board of Governors are
a. appointed by Congress
b. selected by the U.S. President
c. elected by member banks
d. selected by the U.S. Treasury Department
d 13. The usual term of office of members of the Board of Governors is
a. 2 years
b. 5 years
c. 7 years
d. 14 years
c 14. Regarding the Board of Governors of each Federal Reserve Bank,
a. all members must be bankers
b. there must be a mixture of Republicans and Democrats
c. two-thirds of the members must be nonbankers
d. one member must represent labor
d 15. Within certain limits, the reserve requirement for checkable deposits are established by
a. Congress
b. the U.S. President
c. each Federal Reserve Bank
d. the Board of Governors
c 16. Membership in the Federal Reserve System is
a. limited to national banks
b. limited to state banks
c. required of national banks and open to state banks
d. forbidden to state banks