Banking & Financial Systems ©2013
Chapter 5: Federal Reserve System—Checkpoint Solutions
Checkpoint 5.1
1.
Why were rural citizens opposed to the First Bank of the United States?
Answer:
They believed it took power away from the states and put it in the hands of
eastern bankers.
2.
What did the US Supreme Court decide in McCullough v. Maryland?
Answer:
3.
Why is the time from 1837 to 1863 known as the era of free banking?
Answer:
4.
The creation of the central bank is within the power of Congress.
During this time, all bank functions were handled by state banks.
What two things did the Office of the Comptroller of the Currency
accomplish when it was first created?
Answer:
5.
It created a uniform national currency and a system of national banks.
How does a bank panic usually start?
Answer:
A bank panic usually starts by a run on a single bank.
Checkpoint 5.2
1.
How is the Federal Reserve System set up differently than its
predecessors?
Answer:
The structure of the Fed, including its location and organization, is meant to
safeguard against corruption.
2.
Why did the Fed’s designers want to avoid making the Fed a single bank
in New York?
Answer:
They feared that it would be affected by the needs of the stock market and
financial institutions in New York.
3.
How are members of the Board of Governors selected?
Answer:
4.
They are appointed by the US president and confirmed by the Senate.
What is the Federal Open Market Committee responsible for?
Answer:
The FOMC creates monetary policy.
Copyright by Goodheart-Willcox Co., Inc.
Banking and Financial Systems
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Banking & Financial Systems ©2013
Chapter 5: Federal Reserve System—Checkpoint Solutions
5.
Who are the members of the FOMC?
Answer:
All seven members of the BOG are also members of the Federal Open Market
Committee. Five additional members are chosen from the presidents of Federal
Reserve Banks.
Checkpoint 5.3
1.
How does the Fed conduct monetary policy?
Answer:
The Fed uses three tools: open market operations, the discount rate, and reserve
requirements.
2.
When is the discount rate set?
Answer:
3.
Every two weeks.
What are some customer services offered by Federal Reserve Banks?
Answer:
Federal Reserve Banks perform customer services such as depositing a payroll
check directly into a bank account and automatic payment of some bills, such as
a car or house payment, directly from the customer’s account.
4.
What does the Fed do with the money it earns?
Answer:
The Fed first pays its expenses and then gives any additional amount to the US
Treasury to pay the national debt.
5.
How does the Fed use its entire toolset to maintain the stability of the
financial system?
Answer:
It monitors the economy, supervises and regulates member banks, and serves as
the nation’s bank.
Copyright by Goodheart-Willcox Co., Inc.
Banking and Financial Systems
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