Why would a bank prefer making loans by borrowing funds in the fed fundsmarket?Select one:O A. The fed funds rate is less than the interest rate on reserve balancesOB. The fed funds market is less regulated than bank reservesO C. Banks need to maintain reserves above the Fed's required reserve ratioO D. Each of these answers is correctWhich of the following is (1) calculated with information provided by the Bureau ofEconomic Analysis, (2) tracks domestic spending on durable goods, non-durablegoods, and services, and (3) factors in recent price changes before comparing toan index base?O a. The Consumer Price Index (CPI)O b. The Producer Price Index (PPI)O c. The Personal Consumption Expenditures Price Index (PCEPI)O d. The International Standards Price Index (ISPI)

"Since you have asked multiple questions, we will solve first question for you .. If you want any…

Why would a bank prefer making loans by borrowing funds in the fed funds market? Select one: OA. The fed funds rate is less than the interest rate on reserve balances B. The fed funds market is less regulated than bank reserves C. Banks need to maintain reserves above the Fed's required reserve ratio O D. Each of these answers is correct

Why would a bank prefer making loans by borrowing funds in the fed funds market? Select one: OA. The fed funds rate is less than the interest rate on reserve balances B. The fed funds market is less regulated than bank reserves C. Banks need to maintain reserves above the Fed's required reserve ratio O D. Each of these answers is correct

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 24P

See similar textbooks

Similar questions

. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000. If the Bank of Canada requires banks to hold 5 percent of deposits reserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
(A). For the Fed to reduce the money supply using open market operations it should ... O a. Increase the money supply. O b. Lower the minimum reserve requirement. O c. Buy treasury bills from banks. O d. Sell treasury bills to banks. (b). Which of the following is not a result of expansionary Open Market Operations? O a. Increase in the money supply. O b. Less investment spending. O c. Banks make more loans. O d. Decrease in the federal funds rate.
Suppose a bank discovers that its reserves will temporarily fall slightly short of those legally required. How might it remedy this situation through the Federal funds market? Now assume the bank fifinds that its reserves will be substantially and permanently defificient. What remedy is available to this bank? (Hint: Recall your answer to question 4.)
a. Distinguish between legally required reserves and excess reserves. b. Why don’t banks hold a 100 percent reserves? How is the amount of reserves bank hold related to the amount of money the banking system creates? c. Define the term money multiplier? d. Assume that Lucky Bank is required to hold a 10% deposits as reserves, and there is a $3000 increase in demand deposits. Calculate the money multiplier? How much additional new demand deposits couldthe $3,000 deposit support?
When a bank suffers deposit outflows and has no excess reserves, the bank will generally first try to raise the funds by O A. calling in some loans. B. borrowing from the Fed. C. selling some of its securities. D. selling some loans. Suppose that a bank has $80 in checkable deposits, reserves of $15, and a reserve requirement of 10%. Also assume that the the bank suffers a $10 deposit outflow. If the bank chooses to borrow from the Fed to meet its reserve requirement, then the bank would need to borrow $. (Round your response to the nearest two decimal place.)
Activity in money markets increased significantly in the late 1970s and early 1980s because of O regulations that limited what banks could pay for deposits. O rising short-term interest rates. O both A and B of the above. O neither A nor B of the above.
To increase the money supply, the New York Fed is directed to carry out Select one: O a. discretionary lending. O b. quantitative easing. O C. O d. anopen-market sale. O quantitative tightening
The following graph shows a hypothetical demand function for federal funds . Currently , the total amount of reserves in the banking system is $ 50 billion , the discount rate is 3.5 percent , and interest on reserves equals IOR = 1 percent . If the Fed reduces the discount rate to 3.00 percent , the equilibrium federal funds rate ( FFR ) will equal : O a . FFR 3.00% O b . FFR = 2.50% O c . FFR = 2.00% O d . FFR 1.50% O e . None of the above.
The T-sheet below is for the Next to Last National Bank, a commercial bank. The required reserve ratio is 20% of deposits. (a) How much are excess reserves for this bank? (b) Suppose that this bank receives a deposit inflow of $20 million. Suppose also that you are certain that no deposit outflow will occur for several years and that the national economy will continue to grow. To maximize profits, what should you do? Show and explain the new T-sheet.
Let’s assume that the Federal Reserve bank requires the Oxnard County Bank to maintain 20% of deposits as reserves. The Oxnard County Bank decides not to hold excess reserves. If the Federal Reserve System buys $310 million in bonds from the Ventura County Bank which of the following will occur? Group of answer choices the money supply in the economy increases increase in the Ventura County Bank's loan assets of $96 million The Ventura County Bank's net worth increases by $120 million increase in the Ventura County Bank's bond assets by $96 million
Consider a situation where the central bank increases the money supply. equal, if nominal GDP increased by $800 billion during a time when veloc did the central bank increase the money supply? O $400 million O $200 million O $200 billion O $400 billion No new data to save. Last check
Assume that the balance sheet of a bank in your assigned country as below:Assets LiabilitiesReserves $5,000 Deposits $40,000Loans $45,000 Capital $10,000a. If the required reserve ratio is 3 percent, then how much does this bank has excessreserves?b. Suppose a bank purchases $1,500 of government securities using funds from reserves.How much do bank assets change as a result of this transaction? Show the change inthe balance sheet above. How much does Money Supply change due to this transaction?c. Calculate the bank’s leverage ratio. What is the maximum decrease (in %) in the marketvalue of assets before the bank becomes insolvent?