Reference no: EM13151210

A bank borrows money from another bank on an overnight basis to meet reserve requirements. This money would be borrowed in the: A) Stock Market B)Bond Market C) Federal Funds Market D) U.S. Treasury Bill Market Currency and Checkable deposits are: A)Debts of the Federal Reserve Banks or of Financial institutions B) Redeemable for gold and silver from the Federal Reserve. C)Of intrinsic value which determines the relative worth of money. D) The major components of the M3 definition of the money supply A commercial bank has no excess reserves until a depositor places $2,000 in a cash in the bank.The bank then adds the $2,000 to its reserves by sending it to the federal reserve bank. The commercial bank then lends $1,500 to a borrower as a result, the reserves and excess reserves of the bank have been increased respectively by: A) $5k and $1k B) 5k and 4k C) 5k and 5k D) 4k and 4k If the Federal Reserve System sells $5 billion of government securities to the commercial banking system the deposit reserves of commercial banks: A) Increase by $5 bil B) Decrease by $5 bil C) Be added to net worth D) Remain the same Legal reserve requirements: A) Give commercial banks more legal control over the money supply B) Limit “windfall” profits in the commercial banking system C) Permit the Federal Reserve System to control the lending capacity of banks D) Provide the FDIC with the power to protect deposits at the commercial banks and thrifts Assume that the MPC is .75. If the Federal Reserve decreases the money supply, interest rates rise, and investment spending falls by $8billion, then aggregate demand is most likely to: A) Increase by $6billion B) Decrease by $8billion C) Increase by $32billion D) Decrease by $32billion When the Federal Reserve Banks decide to sell government bonds to banks and the public, the supply of reserves in the Federal fund market: A) Increases and the Federal funds rate decreases B) Increases and the Federal funds rate increases C) Decreases and the Federal funds rate decreases D) Decreases and the Federal funds rate increases