Reference no: EM131892557

Which of the following statements are NOT correct:

a. The Federal Funds Rate is the interest rate at which member banks may borrow shortterm funds directly from a Federal Reserve Bank

b. In a reverse repo, a central bank lends securities for a set period, temporarily draining cash from the banking system

c. As part of its response to the recent crisis, the Federal Reserve expanded its traditional tool of open market operations to support the functioning of credit markets through the purchase of longer-term Treasury and mortgage-backed securities

d. Movements in overseas interest rates can lead to changes in New Zealand market rates even if the OCR has not changed

e. None of the above answers.

A US bank facing a cash-flow shortfall because of large net deposit outflows may opt for which of the following:

a. Borrow from other banks in the interbank lending market at an interest rate known as the federal funds rate

b. Use a repurchase agreement (repo) selling some of its securities to another bank or securities dealer with the promise to buy it back at later date at an interest known as the repo rate

c. Acquire reserves by borrowing from the Fed at a rate known as the discount rate

d. All of the above answers are feasible choices

e. None of the above answers are feasible choices.