Reference no: EM13865227
1. A bank has $1 million in vault cash, $5 million in short term Treasury securities and $20 million in deposits at a Federal Reserve Bank.
- The bank’s primary reserves are:
- The bank’s secondary reserves are:
2. Identify the term or concept that fits each description.
A) The interest rate the Fed charges banks for short term loans.
B) The most powerful monetary policy tool.
C) The most used monetary policy tool.
D) The interest rate banks charge each other for short term emergency loans.
E) When the public choosing to keep money out of circulation.
F) Government agency that protects depositors from bank failures (up to a limit).
G) It is made up of the 7 Fed Governors as well as the 5 Federal Reserve Bank
Presidents (Fed. Reserve Bank of NY is always represented).
3. Answer True or False for each of the following.
Alan Greenspan is the current chair of the Federal Reserve Board.
The Fed rarely changes the required reserve rate.
The FOMC is the policy making arm of the Federal Reserve.
When the Federal reserve buys securities it raises the money supply.
Holding money in the expectation of better future investments is known as the precautionary demand for money.
4. Identify for each of the following whether the actual multiplier in the banking system is rising or falling?
Banks increase their reserves beyond what is necessary.
The Federal Reserve lowers the target Fed Funds rate.
Households hoard currency more than before.
The Federal Reserve raises the Required Reserve Rate.
Currency increasingly disappears into the underground economy or overseas.
The Federal Reserve sells bonds.