FINC 409- CH. 4 QUESTIONS WITH CORRECT ANSWERS 2025

FINC 409- CH. 4 QUESTIONS WITH
CORRECT ANSWERS
TheTFederalTReserveTSystemT(fed),TtheTcentralTbankTofTtheTUnitedTStates,TisTresponsibleTforTsettingTmoneta
ryTpolicyTandTregulatingTtheTbankingTsystemT-TcorrectTanswer-True



FannieTMaeTwasTcreatedTtoTsupportTtheTfinancialTmarketsTbyTpurchasingThomeTmortgagesTandTautomobil
eTloansTfromTbanksTsoTthatTtheTproceedsTcouldTbeTlentTtoTotherTborrowers.T-TcorrectTanswer-False



BecauseTofTtheTNationalTBankingTAct,TtheTvolumeTofTnationalTbankTnotesTdependsTonTtheTgovernmentTbon
dTmarketTratherTthanTtheTseasonalTorTcyclicalTneedsTofTtheTnationTforTcurrency.T-TcorrectTanswer-True



ATmajorTweaknessTofTtheTbankingTsystemTunderTtheTNationalTBankingTActsTwasTthatTtheTmoneyTsupplyTco
uldTnotTbeTeasilyTexpandedTorTcontractedTtoTmeetTchangingTseasonalTneedsTand/orTchangesTinTeconomicT
activity.T-TcorrectTanswer-True



TheTUnitedTStatesTwasToneTofTtheTearliestTmajor-
industrialTnationsTtoTadoptTaTpermanentTsystemTofTcentralTbanking.T-TcorrectTanswer-False



TheTUnitedTStatesTwasToneTofTtheTlastTmajorTindustrialTnationsTtoTadoptTaTpermanentTsystemTofTcentralTba
nkingT-TcorrectTanswer-True-TFederalTReserveTActTofT1913



ATcentralTbankTisTaTFederalTgovernmentTagencyTthatTfacilitatesToperationTofTtheTfinancialTsystemTandTregul
atesTgrowthTofTtheTmoneyTsupply.T-TcorrectTanswer-True



AlthoughTaTcentralTbankTdoesTnotTnecessarilyToperateTforTprofit,TitTgenerallyTdealsTdirectlyTwithTtheTpublic.
T-TcorrectTanswer-False




TheTFederalTReserveTActTofT1913TprovidedTthatTallTnationalTandTstate-
charteredTbanksTwereTtoTbecomeTmembersTofTtheTFed.T-TcorrectTanswer-False



AllTcommercialTbanksTareTmembersTofTtheTFed.T-TcorrectTanswer-False-
onlyTnationalTbanksTareTrequiredTtoTbeTmembers

, UnderTtheTFederalTReserveTActTofT1913TState-
charteredTbanksTwereTpermittedTtoTjoinTtheTsystemTifTtheyTcouldTshowTevidenceTofTaTsatisfactoryTfinancialT
conditionT-TcorrectTanswer-True



AboutTone-thirdTofTtheTnation'sTcommercialTbanksTareTmembersTofTtheTFed.T-TcorrectTanswer-True



OpenTmarketToperationsTinvolveTtheTbuyingTandTsellingTofTsecurities.T-TcorrectTanswer-True



TheTFedTBoardTofTGovernorsTisTcomposedTofTsevenTmembersTwhoTareTappointedTforTaTtermTofT12Tyears.T-
TcorrectTanswer-False-14Tyears




TheTonlyTbankTassetTthatTcanTbeTcountedTasTreserveTisTdepositsTwithTtheTReserveTBanks.T-TcorrectTanswer-
False-TvaultTcashTisTincluded



TheTcloserTtoTtheTrequiredTminimumTtheTbankingTsystemTmaintainsTitsTreserves,TtheTtighterTtheTcontrolTth
eTFedThasToverTtheTmoneyTcreationTprocessTthroughTitsTotherTinstruments.T-TcorrectTanswer-True



TheTabilityTtoTchangeTtheTreserveTrequirementTisTaTpowerfulTtoolTtheTFedTusesTfrequently.T-
TcorrectTanswer-False




BanksTareTrequiredTbyTtheTFedTtoTholdTreservesTequalTtoTaTpartTofTtheirTdepositsTasTpartTofTtheTfractionalTr
eserveTsystemTofTtheTU.S.TbankingTsystem.T-TcorrectTanswer-True



IfTexcessTreservesTareTnearTzero,TthenTaTreductionTofTaTbank'sTreservesTwillTcauseTtheTsystemTtoTloosenTcre
dit.T-TcorrectTanswer-False-TthisTwillTtightenTcredit



TheTFedTlendingTrateTtoTdepositoryTinstitutionsTwasTconsistentlyTlowerTthanTtheTbankTprimeTlendingTrateTd
uringTtheT1980-2012Tperiod.T-TcorrectTanswer-True



AlthoughTnotTprovidedTforTinTtheToriginalTorganizationTofTtheTFed,TopenTmarketToperationsThaveTbecomeTt
heTmostTimportantTandTeffectiveTmeansTofTmonetaryTcontrol.T-TcorrectTanswer-True