1. The “discount rate” is the rate: a. banks charge their best customers b. the Fed charges banks for reserves c. charged by a bank on loans d. none of the above.2. Which of the following is not a major component of the Federal Reserve System?a. member banks b. Federal Open Market Committeec. Board of Governors d. Securities and Exchange Commission3. Which of the following is not an activity of Federal Reserve District banks?a. clearing checks b. providing loans to member banksc. replacing old currency d. matching lenders & borrowers for commercial loans4. Which is currently the major role of the Federal Reserve’s Board of Governors?a. regulating commercial banks b. regulating foreign tradec. controlling monetary policy d. regulating thrifts.5. Which of the following is not a tool directly under the control of the FED?a. open market operations b. setting the discount ratec. setting the federal funds rate d. adjusting the reserve requirement ratio6. Total funds of commercial banks will initially _____ by the dollar amount of securities _____ by the FED.a. increase; purchased b. increase; sold c. decrease; purchased d. remain unchanged; purchased7. A loose money policy tends to _____ economic growth and places _____ pressure on the inflation rate.stimulate; downward b. stimulate; upward c. dampen; upward d. dampen; downward8. Which of the following best describes the relationship between the FED and the Administration?The FED must receive approval by the Administration before conducting monetary policy.The FED must implement a monetary policy specifically to support the Administration’s policy.The Administration must receive approval from the FED before implementing fiscal policy.None of these is an accurate description.9. Banks sometimes need funds and sometimes have excess funds available. Which of the following is commonly both a source and a use of bank funds:a. MMDAs b. Federal Funds c. discount window d. checking deposits.10. Which of the following is a main deregulatory provision of Depository Institutions Deregulation and Monetary Control Act of 1980?Eliminate/phase-out of deposit interest rate ceilings;allowance of insurance policies to be sold by all depository institutions;new lending flexibility for depository institutions in the area of stocks;elimination of all interstate banking by any depository institutions.11. During a period of rising interest rates, a bank’s net interest margin (GAP) will likely _______ if its liabilities are _________ rate-sensitive than its assets.a. increase; more b. decrease; more c. increase; equally d. decrease; equally12. A gap ratio of less than one suggests that:rate-sensitive assets exceed rate-sensitive liabilities;an increase in interest rates would increase the bank’s net interest margin;rate-sensitive liabilities exceed rate-sensitive assets;an increase in interest rates would increase the bank’s net profitability.13. Banks could decrease their liquid position by restructuring their asset portfolio to contain fewer _________ and more ____________ .a. treasury securities; excess reserves b. loans; treasury securitiesc. corporate bonds; treasury securities d. treasury securities; loans.14. Insufficient capital to offset sudden decline in the value of assets versus liabilities is referred to as ____________ risk.a. sovereign b. liquidity c. insolvency d. credit15. Insufficient cash, either primary or secondary, to offset sudden unanticipated demand for funds/withdrawals is referred to as ____________ risk.a. sovereign b. liquidity c. insolvency d. credit16. The 1999 Financial Services Modernization Actremoved all geographic restrictions to bank operations and branching;enabled banks and others to increase the consolidation of financial services;forced all financial institutions to improve their technological capabilities;allowed banks to ignore all usury laws within the states in which they operated.17. Management of Interest Rate Risk is aided through each of the following except:a. gap analysis b. diversification c. duration analysis d. regression analysis18. Management of Liquidity is aided through each of the following except:a. duration b. securitirization c. vault cash d. a treasury portfolio19. As the dollar amount related to failing banks and thrifts in the 1980s mounted, which of the following was organized to handle and close those failing institutions:a. FDIC b. FOMC c. RTC d. TBTF20. The measure of interest rate risk which uses the difference between rate-sensitive assets and rate-sensitive liabilities is called:a. gap management b. duration measurementc. maturity match d. regression analysis21. If a bank’s RSA-RSL is negative, then:the bank is more favorably affected by rising interest rates;the bank is more favorably affected by falling interest rates;the bank is not more favorably affected by either a.) or b.) above;the bank is feeling pressure of an illiquidity crunch.22. Without any changes in the flow of funds or the level of funds at the banks, a decrease in the reserve requirement will: a. increase required reserves b. decrease excess reservesc. increase excess reserves d. decrease total reserves.23. If I stated that “the portfolio of federal bonds amassed during 2009 … swell(ed) …about doubling,” then this would be in contrast to the FED’s initial action to the 2007 crisis when we saw a different change on the FED’s balance sheet. Which of the following reflects these contrasting actions best. In reaction to the 2007-2008 crisis:a. the FED expanded the money supply without expanding either the Loan or Security Portfolio on its balance sheet.b. the FED forced gold prices to record prices to provide the collateral to print additional money.c. the FED increased its security holdings associated with repos, acceptances, foreign securities, and foreign currencies.d. the FED sold Treasuries from its portfolio and expanded loans to record high amounts.24. People who fear the FED is “stoking inflation to stimulate the economy” fear:a. rapid employment growth will shrink the wealth gap reported over the past 20 years;b. increased funds available in the US will be used to purchase overseas products harming our global competitiveness;c. that the FED will not be able to time, recognize and/or control the removal of over-expansionary funds in the system, causing significant inflation in the future;d. their wealth will disappear in the lowering of the tax structure to repay the debt.25. The statement that “Mr. Friedman argued that the FED could have prevented the Depression, and he rejected the Keynesian doctrine of using government spending to stimulate demand,” implies that Mr Friedman is:a. in favor of the use of monetary policy to resolve economic challenges, but not fiscal policy.b. in favor of the use of fiscal policy to resolve economic challenges, but not monetary policy.c. in favor of using both fiscal policy and monetary policy simultaneously and in coordination with each other to resolve economic challenges.d. in favor of no government or agency (FED) interference with the operation of the free market.