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Money and Banking Chapter 15
for the BJU Fin 305 (Burkholder) final exam
Terms in this set (124)
T of F: Central banks played a key role in worldwide recovery after the financial crisis of 2008.
"Reserve Bank" or "Monetary Authority"
two other terms for a Central Bank
currency, money supply, interest rates; commercial banks
A central bank manages a country's _______, __________, and ____________; and oversees some or all of a nation's _________ __________.
Federal Reserve System
the central bank of the United States
nickname for the Federal Reserve System
T or F: Central banks act only during times of crisis.
British politician who said "The farther backward you can look, the farther forward you can see."
King William of Orange, Bank of England; Napoleon Bonaparte, Banque de France
Central banks are a 20th century phenomenon with two exceptions. Name the two national leaders and the banks they led prior to the 20th century.
year when the Federal Reserve Act created the Federal Reserve System
number of years the U.S. existed before creating the Federal Reserve
Bank of North America
the first incorporated bank in the US, created by the Continental Congress in 1781
year when the Bank of North American was created
current name of the Bank of North America
U.S. Director of Finance who oversaw the creation of the Bank of North America
Tench Francis, Jr.
first cashier of the Bank of NA, who was later appointed First Purveyor of Public Supplies by George Washington, paving the way for the Navy Supply Corps
True of False: The Bank of North America could print bank notes, convertible to specie.
time period when the first Bank of the U.S. was the government's bank
Bank of Pennsylvania
In 1793, the Bank of NA became the state-chartered ________ ___ ________.
nickname for the first Bank of the U.S.
Bank of the U.S.
first federally chartered commercial bank, located in Philadelphia
the first Secretary of the Treasury; a Federalist who oversaw the rise of the Bank of the U.S., and sponsored the Mint Act
public, private credit
Alexander Hamilton said, "The tendency of a national bank will be to increase _______ and _______ ___________."
T or F: Alexander Hamilton supported the creation of a central bank.
BUS I was patterned after the Bank of England, except that it had _______ ____________.
length of BUS I's charter
percentage of BUS I that was owned by the U.S. government
Investors were permitted to purchase stock in BUS 1 with virtually worthless ____________ ____________.
T of F: Monetary corruption is largely a 21st century phenomenon.
Boston, NY, Charleston, and Baltimore
first four branch locations of BUS 1
BUS 1 was very profitable, paying a dividend of ______.
government's bank, commercial bank, and controller of the money supply
three main functions of BUS I
accepting deposits (tax receipts), making loans to the government, and making payments to the government
three ways BUS 1 acted as the government's bank
T of F: Many individuals held accounts at BUS I.
printing currency, lending, and receiving/releasing other banks' notes
three methods by which BUS I controlled the nation's money supply
reserve ratio that BUS I imposed on itself
return bank notes to other banks and demand payment in gold
how BUS I went about reducing the money supply
T of F: Small banks appreciated the role of BUS I.
T or False: Thomas Jefferson supported BUS I.
unfair competition, heavy foreign ownership
two reasons small banks gave for why BUS I should be abolished
number of votes by which BUS I's charter was not renewed
James Madison's VP, who cast the tiebreaking vote that resulted in BUS I's charter not being renewed
years of the interim period between BUS I and BUS II
What nearly happened to the federal government during the interim period, during which they lacked a fiscal agent to collect taxes and pay bills?
annual rate of increase in inflation during the interim period between BUS I and BUS II
time period when the second Bank of the U.S. was the government's bank
nickname for the second Bank of the U.S.
length of BUS II's charter
amount of capital that BUS II started with
percentage of BUS II stock held by the U.S. government
number of members on BUS II's Board of Directors
first president of BUS II (Madison's former Secretary of the Navy)
T or F: BUS II cause many smaller banks to go bankrupt.
The falling price of _________ and BUS II's failure to intervene caused caused Tennessee banks and farmers to fail, unable to pay their mortgages.
the amount of gold shipped to France for the Louisiana Purchase during the period of BUS II
True or False: The Louisiana Purchase hurt the U.S. economy.
second president of BUS II; an SC native who helped defeat the re-chartering of BUS I
cashier for the Maryland branch of BUS II who was instrumental in arguing a significant Supreme Court case and later embezzled 2% of the U.S. money supply
the self-assured third president of BUS II who had written extensively on finance
T or F: Andrew Jackson and Nicholas Biddle were allies.
Congressman who introduced a bill for an early re-charter of BUS II in 1832
year when BUS II died as a result of Jackson's veto
Louis McLane and William Duane
the two Secretaries of the Treasury who refused to follow Jackson's order to withdraw BUS II's funds and were fired
T or F: Andrew Jackson supported BUS II.
Secretary who followed Jackson's order to kill BUS II and was later appointed Chief Justice of the Supreme Court, delivering the Dred Scott opinion
dates of the Free Banking Era after BUS II
nickname for the Free Banking Era of the nineteenth century
currencies, gold inflow, foreign investment, and cheating
During the Wildcat Era, there was an increase in the amount of different ________, __________ from cotton exports, and _________ in U.S. infrastructure; as well as _______ on the 12.5% reserve requirement.
branches, specie, examiners
During the Wildcat Era, banks cheated on the specie requirement by moving gold between _______, filling boxes with nails or glass and putting ______ on top, and ________ bank examiners to record higher reserves.
True or False: During the Wildcat Era, it was relatively easy for depositors to withdraw their cash.
National Banking Act and National Uniform Currency Act
two important acts that ended the Wildcat Banking Era
year when the National Banking Act and National Uniform Currency Act were passed, ending the Wildcat Era
True or False: There were no non-uniform currencies after the National Uniform Currency Act of 1864.
lender of last resort
Money panics occurred because there was no "______ __ ____ _______."
Aldrich-Vreeland Act of 1908
act that was passed after the Panic of 1907 to stop money panics
Chairman of the Senate Finance Committee who supported the banking industry and helped pass an important act in 1908; created/led the National Monetary Commission
National Monetary Commission
commission led by Nelson Aldrich that was supposed to solve the Central Bank issue
centralized reserve, check-clearing mechanism, and fiscal agent
the three primary needs identified by the National Monetary Commission
Owen-Glass Act of 1913
the act that created the Federal Reserve System (also called the Federal Reserve Act)
T or F: Carter and Glass, who led the passing of the Federal Reserve Act, were Republicans.
number of countries with central banks in 1900
year when the Federal Reserve system actually began operations
government's bank and banker's bank
the two basic roles of the Federal Reserve System
As the government's bank, the Fed acts as the ________ _______.
As the bankers' bank, the Fed has the monopoly on the creation of ________.
T of F: In its early days, the Fed kept enough reserves to redeem notes in silver, and even some in gold.
False (issues it)
T or F: The Fed
Federal Reserve Notes
paper currency issued by the Fed
Bureau of Engraving and Printing
creates paper money
Fed's responsibility that involves increasing or decreasing the money supply
T or F: Printing money is a very profitable business.
Losing control of money creation involves losing control of _________.
take active control of its money
primary reason for a country to create a central bank
T or F: Notes issued by a central bank were considered safer than those of smaller banks.
safety and convenience
two main reasons why banks wanted to hold deposits in the central bank
provide loans during bad times, manage the payments system, and oversee commercial banks
three main ways the Fed carries out its role as the bankers' bank
T or F: The ability to create money means the Fed can lend money when no one else can.
T or F: No bank, no matter how well-managed, can withstand a run.
Every country needs a ______ and _______ payments system.
True or False: All banks have an account at the central bank.
government examiners and supervisors
the only ones who can handle sensitive bank information without conflict of interest
securities markets, government's budget
The Fed does NOT control _______ _______ or the _________ __________.
determines the government's budget through fiscal policy
externalities, public goods, and volatility
three reasons why the public, not private sector needs to fulfill the central bank role
inflation, real growth, financial market, interest, rates, and exchange rates
five things the central bank seeks to stabilize
__________ provide the information people need to allocate their resources.
Inflation degrades the _________ content of prices.
T or F: High inflation is good for growth.
condition under which prices double every 2-3 months
term for a long-run, sustainable level of production
technology, capital stock, and number of people who can work
factors that affect potential output
term for growth in potential output
Financial system _______ is part of every central banker's job.
T or F: The idea of central bank independence is a new one.
independent, committee, accountable, transparent, goals
To be successful, a central bank must be (1) ________ from political pressure, (2) make decisions by _________, (3) _____ to the public and __________; and (4) operate within its ______.
In order to be independent, a central bank must be able to ________ its budgets, and they must be ___________.
T or F: Successful monetary policy requires a long time horizon.
T or F: All major central banks make decisions by committee.
T or F: Central bank independence is consistent with representative democracy.
T or F: Today every central bank announces its policy actions almost immediately.
independent, accountable, and good communicators
three important qualities of central bankers that make up the
T or F: Fiscal policymakers tend to take a long-term view of the economy.
taxes and debt
two ways that fiscal policymakers can finance government spending
The job of the central bank is to improve general economic ________ by managing and reducing systematic _____.
T of F: Responsible fiscal policy is necessary for successful monetary policy.