Podcast
Questions and Answers
How many members serve on the Board of Governors of the Federal Reserve System?
How many members serve on the Board of Governors of the Federal Reserve System?
What is the duration of a term served by a board member of the Federal Reserve?
What is the duration of a term served by a board member of the Federal Reserve?
Who designates the chair and vice chair of the Board of Governors?
Who designates the chair and vice chair of the Board of Governors?
What primary role does the Federal Reserve Board NOT perform?
What primary role does the Federal Reserve Board NOT perform?
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Which committee do all seven Board members participate in?
Which committee do all seven Board members participate in?
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What is the typical frequency of meetings held by the Federal Reserve Board?
What is the typical frequency of meetings held by the Federal Reserve Board?
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What is a responsibility of the Federal Reserve Board concerning bank reserve requirements?
What is a responsibility of the Federal Reserve Board concerning bank reserve requirements?
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Which of the following groups does the Federal Reserve Board confer with?
Which of the following groups does the Federal Reserve Board confer with?
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What is the primary purpose of Edge Act corporations?
What is the primary purpose of Edge Act corporations?
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Who leads the Federal Open Market Committee (FOMC)?
Who leads the Federal Open Market Committee (FOMC)?
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What is one of the main responsibilities of the FOMC?
What is one of the main responsibilities of the FOMC?
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How often is the FOMC required to meet at a minimum each year?
How often is the FOMC required to meet at a minimum each year?
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What is the primary method the Fed employs to achieve its monetary targets?
What is the primary method the Fed employs to achieve its monetary targets?
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Which Federal Reserve Bank plays a key role in carrying out open market operations?
Which Federal Reserve Bank plays a key role in carrying out open market operations?
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What aspect of monetary policy does the FOMC NOT directly control?
What aspect of monetary policy does the FOMC NOT directly control?
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What is one of the targets the FOMC aims to achieve through its policies?
What is one of the targets the FOMC aims to achieve through its policies?
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What is the primary reason the Federal Reserve injected billions into the repo market?
What is the primary reason the Federal Reserve injected billions into the repo market?
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How much was the Federal Reserve believed to have in spare capacity of reserves before complications arose?
How much was the Federal Reserve believed to have in spare capacity of reserves before complications arose?
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What will the Federal Reserve do monthly to expand bank reserves?
What will the Federal Reserve do monthly to expand bank reserves?
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Which entity conducts the open market operations for the Federal Reserve?
Which entity conducts the open market operations for the Federal Reserve?
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What aspect of open market operations is managed by the Federal Reserve's Trading Desk?
What aspect of open market operations is managed by the Federal Reserve's Trading Desk?
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What did the Fed's response to the overnight funding market issues include?
What did the Fed's response to the overnight funding market issues include?
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What drives the decision-making behind open market operations within the Federal Reserve?
What drives the decision-making behind open market operations within the Federal Reserve?
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What financial system practice did the Fed resume to manage reserves?
What financial system practice did the Fed resume to manage reserves?
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What primary function do Federal Reserve Banks perform regarding currency?
What primary function do Federal Reserve Banks perform regarding currency?
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What event sparked the increased demand for cash estimated at $697 billion at the end of 1999?
What event sparked the increased demand for cash estimated at $697 billion at the end of 1999?
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What unusual solution was proposed regarding the U.S. debt ceiling crisis beginning in 2011?
What unusual solution was proposed regarding the U.S. debt ceiling crisis beginning in 2011?
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What was the Federal Reserve's stance on accepting the $1 trillion platinum coin if minted?
What was the Federal Reserve's stance on accepting the $1 trillion platinum coin if minted?
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What role does the Federal Reserve System play in check clearing?
What role does the Federal Reserve System play in check clearing?
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What was the peak number of checks cleared through the Federal Reserve system?
What was the peak number of checks cleared through the Federal Reserve system?
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By what year had the number of checks cleared through the Federal Reserve system fallen to 4.74 billion?
By what year had the number of checks cleared through the Federal Reserve system fallen to 4.74 billion?
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What allowed the Treasury to mint a $1 trillion platinum coin?
What allowed the Treasury to mint a $1 trillion platinum coin?
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What action did the Federal Reserve take to rescue AIG during the financial crisis?
What action did the Federal Reserve take to rescue AIG during the financial crisis?
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What was a significant first for the Federal Reserve during the financial crisis of 2008?
What was a significant first for the Federal Reserve during the financial crisis of 2008?
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What was the Federal Reserve's response to the failure of Bear Stearns?
What was the Federal Reserve's response to the failure of Bear Stearns?
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What was one of the measures taken by the Federal Reserve to combat the recession in 2008?
What was one of the measures taken by the Federal Reserve to combat the recession in 2008?
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How much did the Federal Reserve agree to cover in losses on Bear Stearns’s investment portfolio?
How much did the Federal Reserve agree to cover in losses on Bear Stearns’s investment portfolio?
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What was the average amount borrowed daily by securities firms from the Federal Reserve in the first three days of lending?
What was the average amount borrowed daily by securities firms from the Federal Reserve in the first three days of lending?
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What aspect of the economy does the Federal Reserve’s conduct of monetary policy primarily aim to affect?
What aspect of the economy does the Federal Reserve’s conduct of monetary policy primarily aim to affect?
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What overarching effect did the Federal Reserve’s monetary policy changes have during the financial crisis?
What overarching effect did the Federal Reserve’s monetary policy changes have during the financial crisis?
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Study Notes
The Federal Reserve Board
- Seven members appointed by the president of the United States and confirmed by Senate.
- Serve 14-year terms and have staggered expiration dates.
- The president designates two members to be chair and vice chair for four-year terms.
- The board sets monetary policy targets, supervises banks, sets reserve requirements, and reviews discount rates set by the 12 Federal Reserve Banks.
Federal Open Market Committee (FOMC)
- Consists of seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four other Federal Reserve Bank presidents on a rotating basis.
- Meets at least four times a year and sets general monetary policy guidelines.
- They set targets for monetary aggregates and the federal funds rate.
- The FOMC's primary responsibility is to promote full employment, economic growth, price stability, and a sustainable pattern of international trade.
Open Market Operations
- The main tool used by the Federal Reserve to achieve monetary targets.
- Involves the purchase and sale of U.S. government and federal agency securities.
- The FOMC sets the directives and the transactions are normally carried out by traders at the Federal Reserve Bank of New York.
The Discount Rate
- The interest rate that Federal Reserve Banks charge commercial banks for loans.
- The Federal Reserve Board reviews and approves these rates, as well as bank reserve requirements.
Federal Reserve Banks
- Each of the 12 Federal Reserve Banks issues loans to financial institutions.
- They are responsible for the collection and replacement of currency.
- They also distribute new currency to meet the public's need for cash.
The Federal Reserve's Response to the 2008 Financial Crisis
- Federal Reserve Banks cut interest rates and provided liquidity to the financial system.
- The Federal Reserve Bank of New York brokered the sale of Bear Stearns to JPMorgan Chase to prevent its failure.
- The Federal Reserve lent $40 billion to AIG to prevent its failure.
- Federal Reserve Banks lent directly to Wall Street investment banks for the first time.
- The Fed's actions were designed to affect the U.S. economy and to influence and be influenced by international developments.
Check Clearing
- The Federal Reserve System operates a central check clearing system for U.S. banks.
- Depository institutions have accounts with their district's Federal Reserve Bank for this purpose.
- The number of checks cleared through the system peaked in 1990 and has declined since then.
The Federal Reserve Board Trading Desk
- The unit of the Federal Reserve Bank of New York through which open market operations are conducted.
- The manager of the Trading Desk uses the policy directive from the FOMC to instruct traders on the daily amount of open market purchases or sales.
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Description
Test your knowledge of the Federal Reserve Board, the Federal Open Market Committee, and their roles in setting monetary policy. This quiz covers their structure, functions, and responsibilities in managing the economy. Perfect for students of economics and finance!
