Level 3,Test 5 Answers United States Money and Monetary System
1. Yes
2. No
2. The Federal Reserve provides support for the Treasury’s savings bonds program. Although savings bonds represent less than 5 percent of the federal debt, they are a means for individuals to invest in government securities with a small initial investment, currently:
1. $25
2. $100
3. $1000
3. The U.S. dollar, which is the currency most used in international transactions, constitutes about what percent of other countries’ official foreign exchange reserves.
1. 10%
2. 30%
3. More than half
4. What is Eurocurrency business?
1. Business conducted based on the Euro.
2. Any business with European countries.
3. Taking deposits and lending in currencies other than that of the country in which the banking office is located.
5. Is this an example of sterilization? Assume that the Federal Reserve, perhaps in conjunction with Japanese authorities, wants to counter downward pressure on the dollar’s foreign exchange value in relation to the Japanese yen. The Federal Reserve would sell some of its yen denominated securities for yen on the open market and then trade the yen for dollars in the foreign exchange market, thus reducing the supply of dollar balances at the Federal Reserve. In order to sterilize the effect of intervention on the supply of Federal Reserve balances, the Open Market Desk would then purchase an equal amount of U.S. Treasury securities in the open market (or arrange a repurchase agreement), thereby raising the supply of balances back to it’s former level. The net effect of such an intervention is a reduction in dollar denominated securities in the hands of the public and an increase in yen denominated securities. The operations have no net effect on the level of yen balances at the Bank of Japan or on the level of dollar balances at the Federal Reserve.
2 No
6. To enhance domestic security following the terrorist attacks of September 11, 2001, Congress passed an act which contained provisions for fighting international money laundering and for blocking terrorists’ access to the U.S. financial system. What is the name of this act?
1. The Bank Secrecy Act
2. The September 11th Act
3. The USA Patriot Act
7 The Sarbanes-Oxley Act of 2002 seeks to improve the accuracy and reliability of corporate disclosures and to detect and address corporate and accounting fraud.
1. True
2. False
8. The Federal Reserve may assess a fine or remove an banking officer or banking director from office and permanently bar him or her from the banking industry or both
9. The Federal Reserve has primary supervisory authority for state banks that elect to become members of the Federal Reserve System (state member banks). State banks that are not members of the Federal Reserve System (state nonmember banks) are supervised by the:
1. DFIC
2. FDIC
3. CIDF
10. As of March 2004, how many commercial banks are in the United States?
1. Approximately 7,00
2. Approximately 7,700
3. Approximately 77,700
11. The “Taylor rule,” named after the prominent economist John Taylor, is a guide to assessing the proper stance of monetary policy. It relates the setting of the federal funds rate to the primary objectives of monetary policy .
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