Reference no: EM131058508

1. If the Fed raises the discount rate what effect will this have on the monetary base and on the money supply?

2. Suppose that a bank has assets: some required reserves, some excess reserves, some loans, and some securities. If they change their strategy, by how much can they increase their loans?

3. Suppose that the required reserve ratio is 12.5%. If reserves in the banking system increase by $3 billion as a result of discount loans of $3 billion, why isn't the banking system in equilibrium? What will continue to happen in the banking system until equilibrium is reached? Show changes to the banking system's balance sheet.

4. If the fed decides to use discount policy to increase the money supply what will it do? Be specific about who within the federal reserve system makes the decision, and who else is involved in the process.

5. If the fed decides to use open market operations to raise the interest rate what will it do? Be specific about who within the federal reserve system makes the decision, and who else is involved in the process.

6. During Christmastime, when the public's holding of currency increase, what defensive open market operations typically occur? Why?

7. If a bank buys $70 million of bonds from the Fed and also borrows $30 million from the discount window, what will be the effect on the level of checkable deposits?

8. In 2008 the Fed began paying interest on reserves. What do you think happened to the level of excess reserves after this change was made? Excel Problem: For this problem, you must calculate your answer using excel. You must ALSO
display the required balance sheets in excel and upload the spreadsheet.

9. Suppose that the required reserve ratio is 6.25%. If the Fed sells $350 million of bonds to the First National Bank. What happens to reserves and the monetary base? What will happen to the money supply? Show the changes in First National Bank's balance sheet, The Federal Reserve's balance sheet, and the collective banking system's balance sheet.