Chapter 15 The Federal Reserve System and Monetary Policy   1. In the Federal Reserve System, power is shared by __________     a) a governing board, 12 district banks, and 25 branch banks.     b) a governing board and the 12 district banks.     c) 12 district banks and 25 branches.     d) 12 district banks, 25 branches, and 5,000 member banks.   2. Each of the seven full-time members of the Fed's Board of Governors __________     a) is appointed by the Senate to serve for two-year terms.     b) is elected by voters in the state in which they live.     c) risks not being reelected because of unpopular decisions.     d) is appointed by the president with approval by the Senate for a 14-year term.   3. The group that meets approximately eight times a year to decide the course of action that the Fed should take to control the money supply is the __________     a) Board of Governors.     b) Federal Advisory Council (FAC).     c) Federal Open Market Committee (FOMC).     d) Senate.   4. Today the MOST important function of the Federal Reserve System is __________     a) regulating the nation's money supply.     b) ending the periodic financial panics.     c) processing checks.     d) serving as the government's banker.   5. All of the following are examples of what often happens during times of loose money policy EXCEPT __________     a) businesses expand.     b) credit is inexpensive and abundant.     c) consumers buy less.     d) consumers buy more.   6. All of the following are examples of what often happens during times of tight money policy EXCEPT __________     a) consumers save more.     b) more people are employed.     c) unemployment increases.     d) businesses postpone expansion.   7. The fractional reserve banking system used in the United States requires that __________     a) banks hold a certain percentage of their total deposits either as cash in their vaults or in Fed district banks.     b) banks must lend a certain percentage of their total deposits.     c) banks hold a certain percentage of their total deposits as cash in their vaults.     d) banks hold a certain percentage of their total deposits in Fed district banks.   8. The purpose of the fractional reserve banking system is to __________     a) provide for tight money policy.     b) ensure that there are enough cash reserves in the bank to provide for large cash withdrawals from checking accounts.     c) provide for new money.     d) strike a balance between tight and loose money.   9. The ability of banks to allow more than one individual to spend the same money is called __________     a) a loose money policy.     b) a tight money policy.     c) the monetary policy.     d) the multiple expansion of the money supply.   10. Which of the following statements about the reserve requirement is NOT TRUE?     a) To control the money supply, the Fed has most often used adjustments to the reserve requirement.     b) Even small changes in the reserve requirement can have major effects on the money supply.     c) Increasing the reserve requirement decreases the amount of money in the economy.     d) To raise the reserve requirements, a bank can call in some loans, sell off securities and investments, or borrow from another bank or the Federal Reserve.   11. The Fed might raise the discount rate in order to __________     a) encourage borrowing.     b) pass on its increased costs to its customers.     c) increase the money supply.     d) discourage borrowing.   12. Which of the following is TRUE concerning the Fed's open-market operations?     a) Buying and selling government securities, or open-market operations, is the major tool used by the Fed to control the money supply.     b) When the Fed buys securities, it decreases the money supply.     c) When the Fed sells securities, banks have more money to lend.     d) Individual investors conduct most open-market transactions.   13. The Fed creates "new" money by __________     a) borrowing money from member banks.     b) buying government securities such as Treasury bills.     c) selling government securities such as Treasury bills.     d) encouraging the use of credit cards.   14. Keeping track of changes in the money supply has become more difficult because of all of the following EXCEPT __________     a) changes in the consumer price index.     b) new savings and investment opportunities.     c) the increase in the use of credit cards.     d) the increased use of electronic funds transfer.