Question

4. Which of the following statements about the Federal Reserve is (are) correct?
A. The Fed conducts monetary policy by changing the money supply
B. The Fed acts as a lender of last resort to the banking system
C. The Fed does not convert Federal Reserve Notes into gold
D. All of the above
E. A and B, only

5. The regional Federal Reserve Banks
A. regulate banks in their regions.
B. are not allowed to make loans to banks in their region.
C. have more voting members on the FOMC than does the Board of Governors.
D. are each headed by a member of the Board of Governors.
E. Both B and D.

6. The members of the Federal Reserve’s Board of Governors are
A. elected by bankers in each Federal Reserve Region.
B. elected to office by the public every fourteen years.
C. nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives.
D. appointed by chairperson of the FOMC and confirmed by the U.S. Senate banking committee.
E. appointed by the president of the U.S. and confirmed by the U.S. Senate.

Answer 1

Solution-

4) The most important features of Federal Reserve are-

a) It conducts monetary policy by changing the money supply.

It does so to target inflation rate or boost Economic growth. It increases money supply to boost Economic growth. It reduces money supply to reduce inflation rate.

b) The Fed acts as a lender of last resort to the banking system. When the banks are caught in bank run, and all the deposits fall short for repayment to the people, the commercial banks take loan from the Fed at some interest rate. Thus the Fed acts as a lender of last resort.

c) The Fed used to convert Federal Reserve Notes into gold before January 30 1934 but since January 30, 1934 Federal Reserve Notes have not been redeemable into gold, silver since January 30,1934 after the amendment of Section 16 of the Federal Reserve Act.

Thus all the options a,b, c are correct. So option D is correct

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