Question

Q41H. Which of the following is not true about the Federal Reserve System?

a. The Federal Reserve System consists of 12 regional Federal Reserve Banks.

b. The Fed System is a department in the Executive Branch of the U.S. government and the Fed chairman reports directly to the President.

c. The Federal Reserve conducts U.S. monetary policy, supervises and regulates banking in the United States, maintains stability in the U.S. financial system, and provides financial services to the government and public.

d. All the above.

Q41I. The Federal Open Market Committee:

a. includes the seven Federal Reserve governors.

b. includes all the presidents of the regional Federal Reserve banks, but only 5 presidents vote at any one time.

c. includes Congressmen members of the Budget and Management committee

d. both a and b.

e. B and C

f. None of the above

Q41J. Which of the following is not an objective of the Federal Reserve?

a. economic growth

b. low unemployment

c. price stability

d. high long-term interest rates

Q41K. Which of the following instruments of Fed monetary policy involves the buying or selling of U.S. government securities in the open market to influence the level of bank reserves?

a. open-market operations

b. discount-rate policy

c. reserve-requirements policy

d. none of the above

Answer 1

Q41H. Correct option is b. The Fed System is a department in the Executive Branch of the U.S. government and the Fed chairman reports directly to the President.

The above mentioned statement is not true about Federal Reserve System. The Board of Governors & Federal Open Market Committee are in the executive branch but they are not subject to direction or control by the President in the performance of their statutory functions. Also, there are some special provisions in the Federal Reserve Act that protect the Board from the pressure or influence by the President as well as the Congress.

Q41I. Correct option is d. both a and b. The Federal Open Market Committee: includes the seven Federal Reserve governors, also, includes all the presidents of the regional Federal Reserve banks, but only 5 presidents vote at any one time.

The Federal Open Market Committee consists of twelve members which includes the seven members of the Board of Governors of the Federal Reserve System, the president of Federal Reserve Bank of New York & four members from the remaining eleven Reserve bank presidents who serve on rotating basis for a period of one year.

Q41J. Correct option is d. high long-term interest rates.

High long-term interest rates is not an objective of Federal Reserve. The primary objectives of Federal Reserve includes maximizing price stability, minimizing unemployment & also ensuring moderate long term interest rates & thereby ensuring economic growth of the nation.

Q41K. Correct option is a. open-market operations.

Open-market operations involves the buying or selling of U.S. government securities in the open market to influence the level of bank reserves. It is one of the instrument of Federal Reserve's monetary policy. It is the most frequently used tool of monetary policy because of its flexibility.