The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when banks' incentives to borrow reserves from the Federal Reserve, they find themselves short on reserves. A lower discount rate thereby the quantity of reserves in the banking system and causing the money supply to The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to sell government bonds, the quantity of reserves in the banking system , banks' need to borrow from each other and the federal funds rate

The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when banks' incentives to borrow reserves from the Federal Reserve, they find themselves short on reserves. A lower discount rate thereby the quantity of reserves in the banking system and causing the money supply to The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to sell government bonds, the quantity of reserves in the banking system , banks' need to borrow from each other and the federal funds rate

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter13: Monetary Policy

Section: Chapter Questions

Problem 8E

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How do banks create new deposits by making loans, and what factors limit the amount of deposits and loans they can create? When a bank makes a loan, The amount of loans and new deposits that a bank can create is limited by OA it creates a new deposit for the person who receives the loan; the banks' excess reserves, the desired reserve ratio, and the currency drain ratio O B. the Fed prints more dollar bills; the speed at which the Fed can increase the quantity of bills in circulation and the desired reserve ratio O C. the Fed creates a new deposit for the bank; the bank's total assets and total liabilities O D. the Fed creates a new deposit for the bank; the amount of excess reserves and the desired reserve ratio O E. it creates a new deposit for the person who receives the loan; the banks total assets and total liabilities
You take $100 you had kept under your mattressand deposit it in your bank account. If this $100stays in the banking system as reserves and if bankshold reserves equal to 10 percent of deposits, byhow much does the total amount of deposits in thebanking system increase? By how much does themoney supply increase?
When the Fed began paying banks interest on their reserve deposits with the Fed in 2008, this provided it with a tool that could be used to: O control the M2 money supply, but not the M1 money supply. O determine if interest rates should be increased or decreased. O determine whether the money supply should be increased or decreased. O control the reserves of banks, and act as a substitute for mandated reserve requirements,
BSW Bank currently has $150 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits. iIf the Federal Reserve decreases the reserve requirement to 6 percent, show the balance sheet of BSW and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume BSW withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to BSW in the form of transaction deposits.
Explain which interest rate sets the upper limit on the federal funds rate. The upper limit on the federal funds rate is the _______ because _______. A. discount rate; the discount rate must be 1 percent higher than the federal funds rate B. interest on reserves rate; a bank will borrow reserves only if the federal funds rate is less than the interest on reserves rate C. discount rate; a bank will borrow reserves only if the federal funds rate is less than the discount rate D. long-term real interest rate; the loanable funds market determines the federal funds rate range
. If there is a recession, the Fed would most likely encourage banks to provide loans by: O buying government securities O raising the discount rate O raising the required reserve ratio O raising the federal funds rate selling government securities
Why was the Federal Reserve System set up withtwelve regional Federal Reserve banks rather than onecentral bank, as done in other countries?
Moving to another question will save this response. Question 26 If the Federal Reserve raises the reserve requirement O a. this would increase the money supply and stimulate the economy O b. this would decrease the money supply and dampen the economy O c. this would have no effect on the economy as it is simply a banking operation O d. this is not something the Federal Reserve can control A Moving to another question will save this response.
Which of the folloving represents a change in today's banking policies that should prevent a recurrence of the bank panics of 1930-1933? O A. banks are more cautious lenders O B. banks keep large amounts of excess reserves on hand O . the FDIC insures bank deposits and therefore depositors do not panic and rush to withdraw money when individual banks have financial problems O D. the President now has the authority to close banks whenever panics occur
Which of the following is considered a liability to a bank? Lütfen birini seçin: O A. the bank's loans O B. government securities O C. reserves O D. the bank's buildings and equipment O E. demand deposits
The table shows the commercial banks' balance sheet (aggregated over all the banks). The commercial banks' desired reserve ratio on all deposits is 5 percent and there is no currency drain. Question Help Calculate the bank's excess reserves. Assets >>> Answer to 2 decimal places. Liabilities (millions of dollars) Reserves at the Fed 20 The banks' excess reserves are $ Checkable deposits 120 million. Cash in vault 15, Savings deposits Securities 90 65 Loans 110 Enter your answer in the answer box and then click Check Answer. ? 2 parts remaining Clear All Check Answer MacBook Air DII DD F12 888 F11 F10 F7 F8 F9 F5 F6 F4 esc F2 F3 F1 & # $ % delete %3D ! @ 6. 8. 4 1 2 Y Q W E tab J K F G A S caps lock N M V shift option command I T
The graph shows the demand curve for reserves in the market for bank reserves. The federal funds target rate is 4 percent. Draw the supply curve of reserves to achieve the federal funds target rate. Label it. Draw a point at the equilibrium in the market for bank reserves. Choose the statement that is incorrect. O A. Banks hold reserves to meet the required reserve ratio and so that they can make payments. OB. The Fed's open market operations determine the demand for reserves. OC. The higher the federal funds rate, the smaller is the quantity of reserves demanded. O D. Bank reserves are costly to hold because they can be loaned in the federal funds market and earn the federal funds rate. Federal funds rate (percent per year) 8.00 7.00- 6.00- 5.00- 4.00- 3.00- RD 2.00+ 75 25 50 100 Reserves on deposit at the Fed (billions of dollars) >>> Draw only the objects specified in the question.