The factors that would shift the demand curve for reserves include A. the federal funds rate. B. an economic expansion or contraction. C. anticipated liquidity shocks. D. an anticipated change in inflation. E. a changing deposit base. (Check all that apply.)
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- QUESTION 1 Which actions by banks ensure that reserves are adequate to cover deposit outflows? A. Customer relations managment B. Asset management C. Liquidity management D. Liability managementThe Federal Open Market Committee can buy and sell government securities/bonds. Which of the following tools of monetary policy does this describe? A. interest on excess reserves B. open market operations C. reserve requirement D. discount rate48. Which one of these is not a tool used in monetary policies? a. Bank rates b. Open market operations c. Tax rates d. Cash reserve ratio
- Suppose a banking system with the following balance sheet has no excess reserves. Assume that banks will make loans in the full amount of any excess reserves that they acquire and will immediately be able to eliminate loans from their portfolio to cover inadequate reserves. Assets (in Billions) Liabilities (in Billions) Transactions $100 account deposits Total reserves S800 $200 $500 Se00 Total liabilities Securities Loans Total assets $800 Instructions: In part a, enter your response as a percentage rounded to one decimal place. For all other parts, enter your responses as a whole number. a. What is the reserve requirement? b. Suppose the reserve requirement is chalged to 10 percent. Reconstruct the balance sheet of the total banking system after all banks have fully utilized their lending capacity. Assets (in Billions) Llabilities (in Billons) Transactions account deposits Total reserves Securities Loans Total assets Total liabilitiesWhy are credit cards not included in the money supply even though they can be used easily for transactions? A. Because credit cards are not always 100% reliable. B. Because credit cards are not physical money. C. Because there are other more efficient methods of money supply. D. Because the credit card company is effectively making you a loan..To increase the money supply immediately but just slightly, the SARB would most likely-------. Select one: a. any of options would be suitable for this purpose b. lower the discount rate c. buy securities on the open market d. lower reserve requirements
- A purchase of U.S. government securities by the Fed causes A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. D. a multiple expansion of the money supply because the required reserve ratio is less than onea. (i) Distinguish between legally required reserves and excess reserves. (ii) 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?What does it mean when a commercial bank has "excess reserves"? Select one: a. It is making above-normal profits on its loans to customers. b. Its actual reserves are less than its target reserves. c. It is in a position to make additional loans. d. Its reserves exceed its loans. e. Its loans to customers exceeds its target reserves..
- Assume that the banking system has total reserves of $200 billion. Additionally, assume that the Federal Reserve mandates that required reserves are 25% of checking deposits. Banks may not hold excess reserve and households have no currency. What is the money supply? Select one: a. $600 billion b. $450 billion c. $800 billion d. $300 billionCeline, another manager at a different branch of MillerBank in a different region of the country, faces a reserve requirement of 10%. She has excess reserves 0f $1000. What’s the maximum amount that she could increase the money supply? a.500 dollars b.1000 dollars c.10000 dollars d.100 dollars e.2000 dollarsWhich statement(s) is/are TRUE? I. Increasing the reserve requirement would decrease the money supply. II. Decreasing the discount rate would decrease the money supply. III. Buying government bonds would increase the money supply. II only III only I and III only I and II only