ECON 2 Lecture 9: Federal Reserve and Financial Crises
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Each Federal Reserve Bank is
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| a corporation. | ||
| a government owned enterprise. | ||
| a government subsidized entity. | ||
| a government-sponsored enterprise. |
A transaction in which the Fed agrees to buy a security one day and sell it back the next day is
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| an overnight securitization operation. | ||
| a repurchase agreement. | ||
| a legal tender. | ||
| a rebate sale. |
The Federal Reserve document that states the goals of the FOMC and the target for the federal funds rate is known as the
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| Directive. | ||
| Beige book. | ||
| Bluebook. | ||
| Green book. |
How long is the normal term in office for a Governor of the Federal Reserve Board?
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| Five years | ||
| Seven years | ||
| Fourteen years | ||
| Life |
The federal funds rate is the interest rate on
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| loans to banks from the Fed. | ||
| loans by banks to the Fed. | ||
| short-term loans between banks. | ||
| Treasury bills. |
Expenditures of each Federal Reserve Bank are approved by
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| the U.S. Senate. | ||
| the President of the United States. | ||
| the U.S. Treasury Department. | ||
| the Federal Reserve Board of Governors. |
Federal Reserve Banks pay for their central banking operations through
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| government tax revenue. | ||
| interest on the securities they own. | ||
| fees charged to banks that use their services. | ||
| dividends paid by local banks. |
When the Fed engages in open-market operations, the transactions are conducted by
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| the Open Market Desk at the Federal Reserve Bank of New York. | ||
| the Open Market Desk at the Federal Reserve Board in Washington, D.C. | ||
| the National Bureau of Economic Research. | ||
| the Federal Open Market Committee. |
In 2006, Chairman Greenspan left the Fed because
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| President Bush wanted him to resign. | ||
| he reached mandatory retirement age. | ||
| his term as Governor expired. | ||
| his term as Chairman expired. |
The Federal Reserve publication that discusses forecasts for the economy is known as the
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| Redbook. | ||
| Beigebook. | ||
| Bluebook. | ||
| Greenbook. |
The FOMC directive
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| describes forecasts for the economy. | ||
| states the target for the federal funds rate. | ||
| discusses the regional economies around the country. | ||
| shows the Fed's balance sheet. |
The chairman of the Federal Reserve Board who reduced the inflation rate from over 10 percent to about 3 percent in the early 1980s was
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| Arthur Burns. | ||
| G. William Miller. | ||
| Paul Volcker. | ||
| Alan Greenspan. |
Which Fed chairman ensured the independence of the Federal Reserve in the 1950s?
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| William McChesney Martin | ||
| Arthur Burns | ||
| Paul Volcker | ||
| G. William Miller |
There are ____ Federal Reserve Banks.
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| seven | ||
| ten | ||
| twelve | ||
| fifteen |
Purchases and sales of government securities in the secondary market are known as
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| discount borrowing and lending. | ||
| federal funds purchases and sales. | ||
| discounting. | ||
| open-market operations. |
The monetary base can be divided into
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| currency plus transactions deposits. | ||
| vault cash plus reserves held at the Fed. | ||
| required clearing balances plus currency. | ||
| reserves plus currency. |
The Fed does not generally change reserve requirements to affect the money supply because
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| the impact is too large. | ||
| the Fed needs the approval of Congress to do so. | ||
| it's not legal for the Fed to do so. | ||
| the Fed needs the approval of the President of the United States to do so. |
The Fed has decided to tighten monetary policy, so it decreases the money supply through
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| defensive open-market operations. | ||
| dynamic open-market operations. | ||
| reduced discount loans for profit. | ||
| reduced discount loans for business needs. |
A haircut is
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| the extra collateral the Fed requires above the value of a discount loan. | ||
| the extra principal a commercial bank requires the Fed to pay when making a discount loan. | ||
| the difference between what an investor pays for a bond and what the investor sells the bond for. | ||
| expected personal grooming for a member of the Board of Governors. |
Currency held by the nonbank public plus banks' vault cash plus banks' deposits at the Fed equals
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| the Fed's capital stock. | ||
| discount loans. | ||
| the monetary base. | ||
| required clearing balances. |
The extra collateral the Fed requires above the value of a discount loan is known as
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| the term premium. | ||
| a haircut. | ||
| a covenant. | ||
| secondary credit. |
Currency held by the nonbank public plus banks' reserves equals
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| the Fed's capital stock. | ||
| discount loans. | ||
| the monetary base. | ||
| required clearing balances. |
The money supply divided by the monetary base equals
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| the reserve ratio. | ||
| velocity. | ||
| high-powered money. | ||
| the money multiplier. |
The main liability on the Federal Reserve's balance sheet is
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| discount loans. | ||
| securities. | ||
| monetary base. | ||
| capital. |
A bank in good condition may take out a loan without the Fed questioning the purpose or nature of the loan. Such a loan is known as
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| a no documentation discount loan. | ||
| a haircut. | ||
| a covenant. | ||
| a primary credit discount loan. |
If the Open-Market Desk at the Fed buys securities when the federal funds rate is below the primary credit discount rate, the most likely effect is that the
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| federal funds rate decreases. | ||
| primary credit discount rate decreases. | ||
| primary credit discount rate increases. | ||
| federal funds rate increases. |
In November and December, people use more currency than usual, so the Fed increases the money supply through
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| defensive open-market operations. | ||
| dynamic open-market operations. | ||
| discount loans for profit. | ||
| discount loans for business needs. |
Reserves held by banks at the Fed that earn implicit interest payments in the form of earnings credits for Fed services are known as
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| required clearing balances. | ||
| reserve requirements. | ||
| excess reserves. | ||
| non-transaction deposits. |
Required clearing balances
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| pay interest in the form of earnings credits. | ||
| count as reserves and can be used to meet reserve requirements. | ||
| pay interest equal to the federal funds rate minus one percent. | ||
| are required to be held against transactions deposits. |