Reading Comprehension 14

1. READ TEXT QUICKLY AND SIGN DIFFICULT WORDS

The Federal Reserve System, as an independent agency of the United States government, is charged with overseeing the national banking system. Since 1913 the Federal Reserve System, commonly called the Fed, has served as the central bank for the United Stated. The system consists of twelve District Reserve Bank and their branch offices, along with several committees and councils. All national commercial banks are required bay law to be members of the Fed, and all deposit-taking institutions like credit unions are subject to regulation by Fed regarding the amount of deposited funds that must be held in reserve and that by definition, therefore, are not available for loans. The most powerful body is seven-member Board of Governors in Washington, appointed by the President and by the Senate.

The System’s primarily function is to control monetary policy by influencing the cost and availability of money and credit through the purchase and sale of government securities. If the Federal Reserve provides too little, money, interest rates tent to be high, borrowing is expensive, business activity slows down, unemployment goes up, and danger of recession is augmented. If there is too much money, interest rate decline, and borrowing can lead to excess demand, pushing up prices and fueling inflation.

The Fed has several responsibilities in addition to controlling the money supply. In collaboration with the U.S. Department of the Treasury, the Fed puts new coins and paper currency into circulation by issuing them to banks. It also supervises the activities of member banks abroad, and regulates certain aspects of international finance.

It has been said that the Federal Reserve is actually a fourth branch of the United States government because it is composed of national policy makers. However, in practice, the Federal Reserve does not stray from the financial policies established by the executive branch of the government. Although it is true that the Fed does not depend on Congress for budged allocations, and therefore is free from the partisan politics that influence most of the other governmental bodies, it is still responsible for frequent reports to the Congress on the conduct of monetary policies.

2. NEW VOCABULARY WITH THEIR MEANING

  • Consists : to be made up or composed (usually followed by of)
  • Branch : any member or part of a body or system; a section or subdivision
  • Several : being more than two but fewer than many in number or kind
  • Institutions : an organization, establishment, foundation, society, or the like,devotedto the promotion of a particular cause or program, especiallyone of a public,educational, or charitable character
  • Regulation : a law, rule, or other order prescribed by authority, especially to regulate conduct.
  • Funds : a supply of money or pecuniary resources, as for some purpose
  • Loans : the act of lending; a grant of the temporary use of something
  • Senate : an assembly or council of citizens having the highest deliberativefunctionsin a government, especially a legislative assembly of a stateor nation.
  • Monetary : of or relating to the coinage or currency of a country.
  • Demand : to ask for with proper authority; claim as a right
  • Inflation : Economics. a persistent, substantial rise in the general level ofpricesrelated to an increase in the volume of money and resulting in the lossof valueof currency
  • Issuing : the act of sending out or putting forth; promulgation; distribution
  • Supervises : to oversee (a process, work, workers, etc.) during executionorperformance; superintend; have the oversight and direction of.
  • Finance : the management of revenues; the conduct or transaction of moneymattersgenerally, especially those affecting the public, as in the fieldsof banking andinvestment.
  • Established : to found, institute, build, or bring into being on a firm or stable basis
  • Budged : to move slightly; begin to move

3. THE IDEAS OF EACH PARAGRAPH

  • Paragraph one : The Federal Reserve System, as an independent agency of the United States government, is charged with overseeing the national banking system. Since 1913 the Federal Reserve System, commonly called the Fed, has served as the central bank for the United Stated.
  • Paragraph two : The System’s primarily function is to control monetary policy by influencing the cost and availability of money and credit through the purchase and sale of government securities.
  • Paragraph three : The Fed has several responsibilities in addition to controlling the money supply.
  • Paragraph four : It has been said that the Federal Reserve is actually a fourth branch of the United States government because it is composed of national policy makers. However, in practice, the Federal Reserve does not stray from the financial policies established by the executive branch of the government.

4. ANSWER FROM THE QUESTIONS GIVEN

1. Which of the following is the most appropriate title for the passage?

  • A. Banking
  • B. The Federal Reserve System
  • C. The Board of Governors
  • D. Monetary Policies

2. The word overseeing in paragraph 1 is closest in meaning to ?

  • A. Supervising
  • B. Maintaining
  • C. Financing
  • D. Stimulating

3. The word confirmed in the paragraph 1 could best be replaced by ?

  • A. Modified
  • B. Considered
  • C. Examined
  • D. Approved

4. According to the passage, the principal responsibility of the Federal Reserve System is ?

  • A. To borrow money
  • B. To regulate monetary policies
  • C. To print government securities
  • D. To appoint the Board of Governors

5. The word securities in the paragraph 2 is intended to mean ?

  • A. Debs
  • B. Bonds
  • C. Protection
  • D. Confidence

6. What happen when the Federal Reserve provides too little money?

  • A. Demand for loans increases.
  • B. Unemployment slows down.
  • C. Interest rates go up
  • D. Business expand

7. In paragraph 2, the author suggests that inflation is caused by ?

  • A. High unemployment rates
  • B. Too much money in the economy
  • C. Very high fuel prices
  • D. A limited supply of goods

8. What does the author mean by the statement However, in practice, the Federal Reserve does not stray from the financial policies established by the executive branch of the government?

  • A. The Fed more powerful than the executive branch of the government.
  • B. The policies of the Fed and of the executive branch of the government are not the same.
  • C. The Fed tends to follow the policies of the executive branch of the government.
  • D. The Fed reports to the executive branch of the government.

9. All of the following statements could be included in summary of the passage EXCEPT ?

  • A. The Federal Reserve is an independent agency of the United States government.
  • B. The Federal Reserve controls the flow of money and credit by buying and selling government securities.
  • C. The Federal Reserve issues new coins and currency to banks.
  • D. The Federal Reserve receives its yearly budget from Congress.

5. SUMMARY OF THE PASSAGE

The Federal Reserve System, as an independent agency of the United States government, is charged with overseeing the national banking system. Since 1913 the Federal Reserve System, commonly called the Fed, has served as the central bank for the United Stated. It has been said that the Federal Reserve is actually a fourth branch of the United States government because it is composed of national policy makers. However, in practice, the Federal Reserve does not stray from the financial policies established by the executive branch of the government.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s