Question : 6) “Because monetary policy must be approved by the president : 1227841

6) “Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee.” Analyze the previous statement—is it correct or incorrect?

Answer:  The statement is incorrect on several dimensions. First, monetary policy does not need to be approved by the President of the United States. Second, the president of the United States is not chair of the Federal Open Market Committee, FOMC. Third, the president of the United States is not even a member of the FOMC! The chair of the FOMC is the chair of the Federal Reserve’s Board of Governors.

Topic:  FOMC

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  NAU

7) What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

Answer:  The Federal Reserve System divides the nation into 12 regions, each with a Federal Reserve bank. Each Federal Reserve bank has a nine-member board of directors. Of the nine members, six are elected by the commercial banks within the Federal Reserve district and three are appointed by the Board of Governors. The directors of each Federal Reserve bank appoint the president of the bank, subject to approval from the Board of Governors.

Topic:  Structure of the Federal Reserve

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  WM

8) What is the structure of the Federal Reserve Bank System?

Answer:  The key elements in the structure of the Fed are:

a.The Board of Governors. The Board of Governors has seven members who are appointed by the President of the United States and confirmed by the Senate, each for a 14-year term.

b.The Regional Federal Reserve Banks. There are 12 regional banks, one for each of the 12 Federal Reserve districts. Each of these 12 banks has nine directors who appoint the bank’s president, which is subject to approval by the Board of Governors.

c.The Federal Open Market Committee or FOMC. The FOMC is the Fed’s main policy-making committee. It has 12 voting members. Seven of the members are on the Board of Governors. One of the members is the president of the Federal Reserve Bank in New York. The other four members are presidents of other Federal Reserve Banks. Which four presidents are members changes on an annual rotating basis.

Topic:  Structure of the Federal Reserve

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  AA

9) Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Answer:  The Federal Reserve, or Fed, is the U.S. central bank. The Fed consists of twelve regional Federal Reserve Banks scattered across the United States. These banks are overseen by the Board of Governors, a seven member board located in Washington D.C., whose members are appointed by the President of the United States and confirmed by the Senate. The Federal Open Market Committee, or FOMC, is the group within the Fed that sets the nation’s monetary policy. The voting members of the FOMC consist of the chair and other six members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four presidents of the other regional Federal Reserve Banks, on a yearly rotating basis. The Fed’s primarily role in the economy is to set and conduct the nation’s monetary policy. The Fed also provides banking services to banks and helps regulate the nation’s financial institutions and markets.

Topic:  Federal Reserve System

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  TPS