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
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
