Balance-sheet channel of monetary policy mechanism

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Reference no: EM132056069

1. If the target federal funds rate reaches the lower bound the FOMC:

a- would likely raise the discount rate.

b- would likely raise the required reserve rate.

c- would likely shift their focus to purchasing longer-term securities.

d- must stop purchasing securities since they cannot lower nominal rates below zero.

2. The driving force in the balance-sheet channel of monetary policy mechanism is which of the following?

a- Bank net worth

b- Asset diversity

c- Information

d- Timing

3. An open market purchase of securities by the central bank from banks usually will:

a- induce the banks to make more loans since their revenue will decrease if they do nothing.

b- increase the banks' revenue even if the bank does nothing with the reserves.

c- decrease the amount of deposits in the banking system.

d- decrease the banks' willingness and ability to make loans.

4. The movement away from bank lending towards asset-backed securities has:

a- led the FOMC to abandon interest-rate targets.

b- increased the importance of the bank-lending channel of monetary policy.

c- eliminated the bank-lending channel as a mechanism for monetary policy.

d- decreased the importance of the bank-lending channel.

Reference no: EM132056069

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