Question

While all members of the Federal Reserve Board of Governors vote at Federal Open Market Committee (FOMC) meetings, only______ of the regional bank presidents are members of the FOMC.
The Federal Reserve's role as a lender of last resort involves lending to which of the following financially troubled institutions?
U.S. banks that cannot borrow elsewhere
Governments in developing countries during currency crises
U.S. state governments when they run short on tax revenues
The Federal Reserve's primary tool for changing the money supply is the_______ . In order to decrease the number of dollars in the U.S. economy (the money supply), the Federal Reserve will________ government bonds.

Answer 1

Answer:

(i) 5

(ii) Option (A) is correct.

(iii) Open market operations; sell

Explanation:

(A) The Federal Open Market Committee consists:  

(i) 7 members of the Board of Governors  

(ii) 5 of the 12 regional bank presidents

Therefore, only 5 of the regional bank presidents are the members of FOMC.

(B) The fed is lender of last resort to the banks in the united states which don't have any other source of borrowing.

(C) Open market operations refers to the buying and selling of government securities to the public. The central bank of a particular nation uses open market operations as a monetary policy instrument for controlling money supply.

If the fed wants to decrease the money supply in the economy, then it must sell the government bonds to the public. Hence, there is a reduction in the money supply.