Which of the following characterize the Federal Reserve funding facilities used during the U.S. Financial Crisis? 1. Funding facilities were intended to address solvency and liquidity concerns II. Funding facilities were created for a variety of constituents III. Funding facilities were considered by the Fed to be "bail-outs" rather than loans O a. I only O b. I and II only O c. I and III only O d. I, II, and III
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- The Federal Reserve has raised the Federal Funds rate by 3.75 percent within the past year. Ifa bank had capital of 10 percent when the Fed began raising rates and has no loans at risk ofdefault, under what circumstances will its capital position be compromised? Please be specific.Over the last 10 years the Federal Reserve has substantially changed the way itoperates. What is different about how the Federal Reserve now conducts policy? a) It is more secretive about interest rate and other policy changes b) it gives the public forward guidance on what it will do c) it places fewer regulations on commercial banks d) it discuesses its policy in public and asks for guidance from CongressWould the Federal Reserve INCREASE or DECREASE the nation’s money supply during a period of recession? Would the Federal Reserve INCREASE or DECREASE the money supply during a sustained period of inflation? Would the Federal Reserve RAISE OR LOWER the discount rate during a period of recession? Would the Federal Reserve BUY or SELL securities during a time of sustained inflation? Which actions did the Federal Reserve most likely take in order to accomodate the Stimulus Checks during the pandemic?
- 8. 9.. True or false. Without explanation 9. The International Monetary Fund (IMF) , the international financial organization, has no responsibility of making and updating the terms of conditions in The Basel Accord, a well-accepted international standard and guidance for bank capital adequacy. 10. At the outbreak of the financial crisis back in late 2008, the Fed of the US directly bought debts and asset-backed securities of banks and other financial institutions to help the banking system. Such a policy should be classified as nonconventional16. Which of the following is true? a. The Great Depression was caused in part by “the liquidity trap.” b. The Great Depression illustrated why the “Paradox of Thrift” is important for understanding the macroeconomy. c. The Great Depression proved that savings do not equal investment because of pessimistic animal spirits. d. The price system in the capital market (the real interest rate) was sabotaged by a structurally unsound central banking system. e. The Great Depression was caused in part by runaway greed among the business owners of the time.Below is the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd=400,000 - 2(P) Qs=3(P) - 100,000 1. The current market price of these bonds? 2. The current equilibrium interest rate in that bond market? 3. If the Federal Reserve wished to move the interest rate to 5%, would they need to buy or sell bonds? 4. In order to achieve the Fed's goal in #3, the bond price would need to change to what?
- Label each of the following statements true, false, or uncertain. Explain briefly.a) The term investment, as used by economists, refers to the purchase of bonds andshares of stock b) The central bank can increase the supply of money by selling bonds in the marketfor c) Bond prices and interest rates always move in opposite directions. d) If government spending and taxes increase by the same amount, the IS curve doesnot shift. e) When banks hold only a fraction of deposits in reserve, banks create money. At theend of this process of money creation, the economy is more liquid in the sense that thereis more of the medium of exchange, and the economy is wealthier than before.List the names of the current chairperson of the Federal Reserve and members of the Board of Governors of the Federal Reserve System. 1. What is the purpose of the Federal Open Market Committee (FOMC)? 2. Which of the following Fed actions will increase bank lending? Select one or more answers from the choices shown. The Fed raises the discount rate from 5 percent to 6 percent. The Fed raises the reserve ratio from 10 percent to 11 percent. The Fed buys $400 million worth of Treasury bonds from commercial banks. The Fed lowers the discount rate from 4 percent to 2 percent. Note that Fed sets a discount rate that it charges to banks for short-term loans, which then contributes to the rate that the banks charge customers on their loans. While the Fed has the ability to issue Federal Reserve Notes, the paper currency used in the U.S. monetary system, they do not print the money. That task is still performed by the U.S. Mint. After the financial crisis of 2007-2008, Congress…Explain why you would be more or less willing to buylong-term Delta Air Lines bonds under the followingcircumstances:a. The company just released its financial statements, indicating that income decreased and liabilities increased.b. You expect a bull market in stocks (stock prices areexpected to increase).c. You have analyzed your country’s monetary policyand expect interest rates to decrease.d. Brokerage commissions on bonds fall.e. Your income and wealth increased over the last two years
- When regulators engage in macroprudential regulation, they focus on O the safety and soundness of the entire financial institution. O the credit standards of all loans held by the financial institution. O the safety and soundness of the financial system in aggregate. O the safety and soundness of cach liability of the financial institution. A. In April 2022 theFederal Reserve boosted its target for the Federal funds rate for the first time in 14 years, increasing it from a 10-year low of .25% to 4.25%. What role did the Biden Administration have in this decision? A. None; the Fed is not accountable to the executive branch of government.B. Some; most but not all of the people who voted for this change are appointees of the Bush Administration.C. Considerable; if the Bush Administration were unhappy with the decision, it could force the resignation of those who voted in ways it did not like.D. Total; policy makers at the Fed serve at the pleasure of the President.The Minsky Model of a Financial Crisis . Economist Hyman Minsky believed “…the financial system in a market economy is unstable, fragile, and prone to crisis.” Explain in some detail how the financial system is “unstable, fragile and prone to crisis,” according to Minsky What did the psychological term euphoria mean to Hyman Minsky? In other words, define the term as Minsky would define it Briefly specify (but do not explain) the primary case against the market system of economic organization