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GOVT 350 Ferdon FINAL EXAM_ Anatomy of Crisis and Associated Lectures.
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GOVT 350 Ferdon FINAL EXAM: Anatomyof Crisis and Associated Lectures
What is a bank run? - ANS-(liquidity crisis) Occurs when many clients withdraw their
money from a bank, because they believe the bank may cease to function in the near
future
What 1st Method could be employed to stop a bank run prior to the creation of the
Federal Reserve System? - ANS-Method 1: convert assets into cash rapidly through the
availability of additional cash
What 2nd Method could be employed to stop a bank run prior to the creation of the
Federal Reserve System? - ANS-Method 2: Halt a Bank Run by Restriction of
Payments: Hold of 'on demand payments' (currency) by a Bank on behalf of depositors:
What is the monetary policy institution of the United States? - ANS-The Federal
Reserve System
What is the difference between monetary policy and fiscal policy? - ANS-Monetary
Policy is a national policy pursued to ensure money is available for the whole economy.
(not completely independent, as Congress does set the goals for Monetary Policy.)
Fiscal Policy is taxation policy established by Congress that manages economic growth
by influencing demand and employment.
What is the significance of the Federal Reserve Act of 1913? - ANS-Established the
Federal Reserve System
What is the basic regulatory function of the Federal Reserve System? - ANS--
Supervising and regulating banks and other important financial institutions to ensure the
safety and soundness of the nation's banking and financial system and to protect the
credit rights of consumers
- provides for a stable monetary framework by controlling the money supply to prevent
bank runs, or a liquidity crisis.
How many Federal Reserve districts exist? - ANS-12
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