FINC 3310 EXAM 1 SHSU || QUESTIONS AND 100% ACCURATE ANSWERS.
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Course
FINC 3310
Institution
FINC 3310
what are the 2 functions of money correct answers store value and facilitate trade
why do we have such a complex FED reserve system, why did we not just build a central bank in NY city correct answers fear of centralized power
fear of wealthy bankers controlling the system
the desire to diffu...
FINC 3310 EXAM 1 SHSU || QUESTIONS AND 100%
ACCURATE ANSWERS.
what are the 2 functions of money correct answers store value and facilitate trade
why do we have such a complex FED reserve system, why did we not just build a central bank in
NY city correct answers fear of centralized power
fear of wealthy bankers controlling the system
the desire to diffused power across the country
the desire to ensure that all regions were represented
How many Federal Reserve Banks are there? correct answers 12
what are the five pieces of the federal reserve system correct answers 12 fed reserve banks
board of govs
FOMC
FAC
Member banks
What is the Federal reserve system responsible for correct answers Monetary policy
which of the following is not a function of the 12 fed reserve banks correct answers Set margin
requirements for stock
who is the current chairman of the board of govs correct answers Jerome powell
How are the members of the Board of Governors of the Federal Reserve chosen? correct answers
D. The President appoints them, and they are confirmed by the Senate
How long is the term of a member of the Board of Governors? correct answers 14 years
Which of the following is NOT a function of the Federal Open Market Committee? correct
answers B. Evaluate bank mergers and expansions
11. (2 pts)The ability of the central bank to select monetary policy instruments is called correct
answers _______Instrument independence____________________.
The ability of the central bank to set the goals of monetary policy.is called ____ correct answers
Goal independence____________.
What are two arguments that support Fed independence?
These are some arguments in favor of Fed Independence - any 2 are fine or if you have logical
reason that are not listed, that is fine. correct answers • The strongest argument for independence
is the view that political pressure will tend to add an inflationary bias to monetary policy. This
, stems from short-sighted goals of politicians. For example, in the short-run, high money growth
does lead to lower interest rates. In the long-run, however, this also leads to higher inflation.
• The Treasury may seek to finance the government through bonds purchased by the Fed. This
may also lead to an inflationary bias.
• Politicians have repeatedly shown an inability to make hard choices for the good of the
economy that may adversely affect their own well-being.
• Are politicians intelligent enough about monetary policy to manage it well?
• Are voters able to select the best candidates for managing monetary policy?
• Its independence allows the Fed to pursue policies that are politically unpopular, yet in the best
interest of the public.
What are two arguments against Fed independence?
These are some arguments against Fed Independence - any 2 are fine or if you have logical
reason that are not listed, that is fine. correct answers • Some view Fed independence as
"undemocratic"—an elite group controlling an important aspect of the economy but accountable
in few ways.
• If monetary policy is too complex for politicians, why we don't let the other aspects of the
country be controlled by an elite few. Are military issues, for example, any less complex?
• We hold the President and Congress accountable for the state of the economy, yet they have
little control over one of the most important tools to direct the economy.
• Wouldn't it make more sense to have the people who manage fiscal policy also manage
monetary policy so that they are not working against each other?
• The Fed has not always been successful in the past. It has made mistakes during the Great
Depression and inflationary periods in the 1960s and 1970s.
• The Fed can succumb to political pressure regardless of any state of independence. This
pressure may be worse with few checks and balances in place.
Who owns the 12 Federal Reserve banks? correct answers The 12 Federal Reserve Banks are
each owned by the member banks within their regions
Are all of the members of the Board of Governors automatically part of the Federal Open Market
Committee? correct answers yes
Is the chairman of the board of govs automatically the chariman of the FOMC correct answers
yes
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