Which of the following is NOT an accurate description of open market operation: prior to 2008? O It involved buying and selling long-term securities. It involved buying and selling short-term securities. It was used to affect the market for bank reserves.
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- Using the supply and demand analysis (i.e., diagrams)of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant, under the following situations. Please use diagrams a. The economy is surprisingly strong, leading to an increase in the amount of checkable deposits. b. Banks expect an unusually large increase in withdrawals from checking deposit accounts in the future. c. The Fed reduces reserve requirements and then offsets this action by conducting an open market sale of securities. d. The Fed raises the interest rate on reserves above the current equilibrium federal funds rate.Please no written by hand solutions and no image 3) Using the supply and demand analysis of the market for reserves, determine what happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant, if checkable deposits decrease and the vertical part of supply curve intersects the demand curve in its downward sloping part. Graph the initial the initial equilibrium and the new equilibrium.Apart from risk component, several marcoeconomics factors such as federal reserve (the fed ) policy, federal budget deficit or surplus, international factors and level of business activity- influence interest rate. A. the changes in value of foreign currency affect business operation and the value of investment asset in that currency. if the value of the foreign currency increases relative to the home currency, invest asset will lose value. TRUE OR FALSE? B. if the Feds inject a huge amount of money into the market, inflation is expected to decline and longterm interest rate are expected to rise. TRUE OR FALSE? C. When the Feds increases the money supply, short term interest rates tend to decline. TRUE OR FALSE? D. When the economy is weakening, the feds is likely to decrease in short term interest rate. TRUE OR FALSE?
- 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.What are the important key points of financial instrument PAS 32 and Reporting in hyperinflationary economy PAS 29?Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage point. To do this, the Fed will use open-market operations to ? (increase/decrease) the ? (demand for/supply of) money by buying bonds from ? (buying bonds from/selling bonds to) the public.
- An open-market sale of securities by the Fed results in ________ in reserves and ________ in the supply of money. Group of answer choices a decrease; a decrease an increase; a decrease an increase; an increase a decrease; an increaseDiscuss how the money supply is increased through the process of the Fed purchasing bonds in the open market. What is the signficance of doing so?Which bond should have the highest interest rate? A. Low quality bonds B. Medium quality bonds C. High quality bonds Which of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Common stocks are not securities C. Stock prices tend to be very volatile D. Higher stock prices allow companies access to more capital What is the expected impact of a decline in the money supply to the US economy? A. Lower aggregate prices (deflation) B. Higher aggregate prices (inflation) C. There is no general relationship between the money supply and inflaton Which of the following is NOT a component of federal fiscal policy? A. Federal tax revenues B. Federal government expenditures C. Federal budget deficit D. All of the above are components of federal fiscal policy A strong US dollar tends to A. Reduce exports to foreign…
- Explain how the following events will affect the demandfor money according to the portfolio theories of moneydemand:a. The economy experiences a business cycle contraction.b. Brokerage fees decline, making bond transactionscheaper.c. The stock market crashes. (Hint: Consider both theincrease in stock price volatility following a marketcrash and the decrease in wealth of stockholders.)Marly Bank currently has $650M in transaction deposits on its balance sheet. The current reserve requirenment is 10 percent, but the Federal Reserve is decreasing this requirement to 9 percent. Show the balance sheet for the federal reserve and Marly Bank if Marly Bank converts all excess reseves to loans, but borrowers return only 60 percent of these funds to National Bank as transaction deposit.1. Assume the Fed funds rate is initially on target. The demand for reserves by commercial banks increases by $million 2. Households receive allowances from the government account held at the Federal Reserve for $million 7. Which of the following statements is correct? If the Federal Reserve wants to keep the Fed funds rate on target, it must ________ through its the open market operations $million _____ .
