Click on the letter choices to test your understanding Question 1 The s tructure of the Federal Reserve includes Correct The Federal Reserve is comprised of a Board of Governors located in Washington ID: 1028910
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1. Test Your KnowledgeStructure and Functions of the Federal ReserveClick on the letter choices to test your understanding
2. Question 1The structure of the Federal Reserve includes:
3. Correct!The Federal Reserve is comprised of a Board of Governors located in Washington, D.C.; 12 Federal Reserve banks; 24 branches within the 12 districts; and the Federal Open Market Committee. Next
4. Try again!The 24 branches in the 12 districts and the Board of Governors do comprise part of the Federal Reserve’s structure, but there are other components as well.Back
5. Try again! The Federal Open Market Committee, 12 district Federal Reserve Banks, and 24 branches do comprise part of the Federal Reserve’s structure, but there is another component as well.Back
6. Question 2The seven members who are appointed by the U.S. president and confirmed by the Senate for 14-year terms are the
7. Try again!Five of the district Federal Reserve Bank presidents do sit on the Federal Open Market Committee, but they are not appointed by the U.S. president nor are they confirmed by the Senate for 14 years.Back
8. Correct!The responsibilities of the Board of Governors include writing banking regulations and overseeing bank supervision, ruling on applications for mergers, approving changes in the discount rate, setting reserve requirements, and overseeing the activities of the Reserve Banks.Next
9. Try again!The Federal Open Market Committee consists of the Board of Governors and five of the district Federal Reserve Bank presidents, for a total of 12 voting members. District Federal Reserve Bank presidents are not appointed by the U.S. president, nor are they confirmed by the Senate for fourteen years. Back
10. Question 3The nation’s monetary policy is conducted by:
11. Try again!The Federal Reserve’s Board of Governors is included in the group that makes the nation’s monetary policy, but there are other voting members.Back
12. Correct!Monetary policy is conducted by the Federal Open Market Committee, which is made up of the seven members of the Fed’s Board of Governors, as well as five of the regional bank presidents. Next
13. Try again!The U.S. president and Congress are responsible for fiscal policy, or changes in the rules and rates for taxation and in levels of government spending.Back
14. Question 4The Federal Open Market Committee’s voting members are:
15. Try again!The FOMC does include the seven members of the Board of Governors. However, while all 12 Reserve Bank presidents attend and participate in the FOMC meetings, they do not all have a vote each year.Back
16. Correct!The FOMC comprises the seven members of the Board of Governors and five of the 12 Reserve Bank presidents. The president of the New York Fed is a permanent member of the FOMC because of that bank’s role in open market operations. The other 11 bank presidents serve on a rotating annual basis. The FOMC directs open market operations, which are carried out through Federal Reserve Bank of New York’s trading desk.Next
17. Try again!While all 12 Reserve Bank presidents attend and participate in the FOMC meetings, they do not all have a vote each year.Back
18. Question 5Because reserve banks are owned by member banks while governors are political appointees, the Fed is:
19. Correct!The Fed is a mixture of public and private elements. A factor that promotes the Fed’s political independence is that the Fed does not have to rely on appropriations from Congress. The Fed is financially self-sufficient. Its income comes predominantly from interest it receives on its holdings of U.S. government securities.Next
20. Try again! Reserve Banks are owned by member banks, while governors are political appointees. The Federal Reserve System funds its operations with revenue from the interest earned from its holdings of U.S. Treasury securities and fees earned from the payment services it provides to banks, not congressional budget appropriations.Back
21. Try again! Reserve Banks are owned by member banks, while governors are political appointees. The Fed funds its operations with revenue from the interest earned from its holdings of U.S. Treasury securities and fees earned from the payment services it provides to banks, not congressional budget appropriations.Back
22. Question 6The functions of the Federal Reserve are:
23. Try again!The Federal Reserve does not buy and sell stock in the open market. The buying and selling of stock in the United States takes place in organized stock markets that are regulated by the Security and Exchange Commission.Back
24. Try again!The FOMC conducts monetary policy. The Fed also conducts payment services to banks, services that are carried out by each of the 12 district banks. However, these are only two of the Fed’s three primary functions.Back
25. Correct!The three main functions of the Federal Reserve System are monetary policy (conducted by the FOMC), payment services (which includes cash services to banks, including clearing one-third of the nation’s checks and processing electronic payments), and bank supervision and regulation.Next
26. Question 7The goals of monetary policy are:
27. Correct!The Federal Reserve has a dual mandate. The Federal Reserve Act specifies that the role of the Fed (and monetary policy) is to promote maximum employment and stable prices. The Fed does this by influencing the supply of money and credit in the economy.
28. Try Again!The Fed achieves its goal by influencing the supply of money and credit in the economy, but that is not a goal in and of itself. Back
29. Try again!The Federal Reserve’s dual mandate includes a goal of maintaining stable prices and open market operations are a tool used to meet that goal, but these are not the entire mandate for monetary policy given to the Federal Reserve by Congress in 1977. Back
30. Question 8The function of the Fed that includes being the “bankers bank” is:
31. Try again!Monetary policy is the function of maintaining maximum economic growth and employment and stable prices by influencing the supply of money and credit in the economy.Back
32. Try again!Supervision and regulation addresses the safety and soundness of the financial system. The Fed does this by fostering safe, sound and competitive practices in the nation’s banking system. The Fed’s responsibility is to regulate the banking system and to supervise certain types of financial institutions. Back
33. Correct!The Reserve Banks operate as “bankers’ banks,” offering a wide variety of financial services. They distribute currency and coin, process checks, and offer electronic forms of payment. They also compete with private sector financial services to foster competition, safety, and efficiency in the payments system.Next
34. Question 9Which of the following financial institutions are regulated by the Federal Reserve?
35. Try Again!The Federal Reserve does not regulate all financial institutions in the United States. Other agencies that regulate financial institutions include the Federal Deposit Insurance Corporation (FDIC), state bank regulators, the Consumer Financial Protection Bureau, and the Office of the Comptroller of the Currency (OCC). Back
36. Try again!The Office of the Comptroller of the Currency regulates national banks.Back
37. Correct!The Federal Reserve Board supervises state-chartered banks that are members of the Federal Reserve System, bank holding companies, and international banking organizations. The goal of bank supervision is to minimize risk in the banking system.
38. Question 10Which of the following was NOT established as consequence of the Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act?
39. Try again!This 2010 legislation established The Bureau of Consumer Financial Protection to provide consumers with the information they need to make informed financial decisions.Back
40. Try again!The Dodd-Frank Act established the Financial Stability Oversight Council to ensure the stability of our financial system through enhanced monitoring of financial institutions. The Council includes 10 voting members and five nonvoting members, made up of federal and state financial regulators as well as an insurance expert that the U.S. president appoints. Back
41. CorrectWith the passage of the Humphrey-Hawkins Act in 1978, the Federal Reserve’s dual mandate became official. This act states that the monetary policy objectives of the Federal Reserve are to “maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.“ This mandate guides the monetary policy decision making of the Federal Reserve. Next
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