Eco 2035 Week 1 Review Questions

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ECON 2035—Spring 2012 Review Questions for Exam 3 (chapters: Central Banks & the Federal Reserve System, the Money Supply Process, and only part of Tools of Monetary Policy—just the Conventional Monetary Policy Tools section) Exam 3: WEDNESDAY APRIL 25 30 Multiple choice questions 1. What is a central bank? • A government institution that serves as a banker’s bank & is responsible for conducing monetary policy & promoting stability in the financial system 2. In 1900 there were about 18 central banks in the world, but today there are about 160 central banks in the world. Why are there more central banks today than in 1900? (two reasons) • More countries • Recognition that monetary policy is better conducted by Central Bank that is a separate institution with in the…show more content…
(This has NOT been done & is NOT likely to be done!) • 3) Governors ( serve long terms (14 years) which span more than one Presidential term and can’t be reappointed to a second full term; can be removed only for cause (conviction of a crime, misuse of office) 20. What is primary way Congress can exert political influence on the Federal Reserve? What influence does the President have on the Federal Reserve? • The Fed is a creature of Congress, and its structure can, and has in the past, been changed by Congress. Congress might use the threat of structural change to try to influence the Fed o Ex: Propose legislation that would force the Fed to submit budget request to Congress • The President appoints ALL members of the Board of Governors and the Chairman of the Board of Governors. But, once they are appointed the President has NO DIRECT INPUT ON DECISIONS. Although the President can make known through speeches and meetings with the Chairman or the Board of Governors his policy
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