Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 25, Problem 3.1P
To determine
Reason for districts are divided and the banks are located in those 12 cities.
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Students have asked these similar questions
Which of the following is true about the Federal Reserve System?
There are 12 regional Federal Reserve Banks
There are 14 members of the Federal Reserve Board
The FOMC is smaller in size than the Federal Reserve Board
The head of the Treasury also chairs the Federal Reserve Board
In the absence of limits on the behavior of large intermediaries, how might the perception of institutions being "too-big-to-fail" lead to
increased concentration in the banking industry?
The safety net alleviates the too-big-to-fail problem, thus increasing concentration in the banking industry.
The safety net creates moral hazard problems for big banks by encouraging extremely risky behavior. This puts small banks at
a competitive disadvantage, driving them out of the market and leading to an increase in concentration.
The safety net encourages larger banks to split into several smaller institutions, thus increasing the concentration in the
banking industry.
The safety net encourages more banks to enter the market, thus increasing concentration in the industry.
Which of the following determines the amount of money the banking system as a whole can create?
the quantity of bank reserves
the quantity of vault cash held by banks
the gold reserves held by the Federal Reserve
the limit on profits by banks imposed by the U.S. Congress
Chapter 25 Solutions
Principles of Economics (12th Edition)
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- Which of the following is the role of the Federal Reserve System? Select one: a. Set the Required Reserve Ratio for Bank of America b. Manage the account for South Carolina and other state governments c. Make loans to local businesses d. Print new money e. All of these are roles of the Fedarrow_forwardThe Federal Reserve's organization There are 5 , 7, 12 Federal Reserve regional banks. Which of the following contributes to making the Federal Reserve an independent policymaking body? A) There are 12 Federal Reserve banks. B) Its role is written into the U.S. Constitution. C) Members of the Board of Governors are appointed for 14-year terms. The Federal Reserve's primary tool for changing the money supply is choice: the reserve requirement, open-market operation, the discount rate. In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will choice: buy, sell government bonds.arrow_forwardWhat were the two previous central banks the United States had before the current Federal Reserve system? When was the Federal Reserve established? How old are some other central banks in other countries? Describe in detail how the Federal Reserve is structured and explain how it is mostly independent from political interference? Using ideas like supply and demand, explain how the Federal Reserve uses open-market operations to either raise or lower interest rates at the direction of the Federal Open Market Committee (FOMC). See if you can find what the most recent decision made by the FOMC was concerning interest rates and explain how that will be reflected in its open-market operations.arrow_forward
- Again, please consider the following information, related to Economy Alpha. Economy Alpha contains many banks. One of them is Bank One, which has a reserve requirement of 10% and the following information: $8000 cash in Bank One's vault $2000 US government bonds held by Bank One $100,000 checking deposits in Bank One $4000 Deposit in the Fed for Bank One $12,000 savings deposits in Bank One Calculate the maximum amount the entire banking system can create in new money, starting with Bank One's reserves information, carefully following all numeric instructions.arrow_forwardWhy and when was the Federal Reserve created? 1) The Fed was created by the New Deal in 1934 to supervise national investment in publIc works 2) The Fed was created in 1913 in order to supervise banks and to control the money supply. 3) The Fed was created by John Quincy Adams in 1829, abolished by Andrew Jackson in 1831, and reconstituted by Theodore Roosevelt in 1909 as the official national bank tt the guarantor and the obligor for all commercial (not investment) banks 4) None of the abovearrow_forwardUse the following information to answer the questions: Suppose the Texans Bank has total deposit of $2,755, and the required reserve ratio of 7 percent. The current total reserve for the bank is $461. If the bank lend out all its excess reserve. What is the potential money supply creation in this banking system? (Hint: enter your answer in 2 decimal places] You Answered Correct Answer 3,830.71 margin of error +/- 0.01arrow_forward
- Which of the following is not one of the functions of the Federal Reserve? Supervising and regulating banks. Clearing checks. Controlling the money supply. Printing currency.arrow_forwardAn institution that oversees the banking system and regulates the money supply is known as central bank treasury congress the securities and exchange commissionarrow_forwardWhy is it that bank deposit secrecy became a highly sensitive issue with respect to the implementation of the money laundering actarrow_forward
- Which of the following is NOT a part of the Federal Reserve System? The Federal Deposit Insurance Corporation The Board of Governors The Federal Open Market Committee The Twelve District Federal Reserve banksarrow_forwardWhich of the following is true regarding the structure of the Federal Reserve System? Central Power Regional Power Policy Making Board Board of Governors Federal Open Market Committee 12 Reserve Banks Central Power Regional Power Policy Making Board Board of Governors 12 Reserve Banks Federal Open Market Committee Central Power Regional Power Policy Making Board 12 Reserve Banks Board of Governors Federal Open Market Committee Central Power Regional Power Policy Making Board Federal Open Market Committee 12 Reserve Banks Board of Governorsarrow_forwardThe Federal Reserve (also called the Fed) is the central bank of the United States. The Fed oversees the currency and money supply. The Fed system consists of five major parts: (1) the board of governors, (2) the Federal Open Market Committee, (3) 12 Federal Reserve banks, (4) three advisory councils, and (5) the 3,000 member banks in the system. The board of governors administers and supervises the 12 Federal Reserve banks. The 7 members of the board are appointed by the President of the United States and confirmed by the U.S. Senate. The Federal Open Market Committee has 12 voting members and is the policy-making body. The Federal Reserve is a private firm not supported by taxpayer dollars. The Fed buys and sells foreign currencies, regulates various types of credit, supervises banks, and collects data on the money supply and other economic activity. The Fed's actions directly affect everyone in terms of credit card rates, consumer prices, and student loan rates. The Fed uses three…arrow_forward
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