Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal? Lend to commercial banks through the term auction facility Lend to the non-banking public at the discount window Require the non-banking public to repay discount loans Buy the government securities exclusively from the non-banking public By lending to commercial banks through the discount window, the Federal Reserve alters and thus affects

Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal? Lend to commercial banks through the term auction facility Lend to the non-banking public at the discount window Require the non-banking public to repay discount loans Buy the government securities exclusively from the non-banking public By lending to commercial banks through the discount window, the Federal Reserve alters and thus affects

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter6: Government Influence On Exchange Rates

Section: Chapter Questions

Problem 3ST

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What are some of the ways that banks can borrow short-term funds when they need "liquidity"?(Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window".
Which of the following will have the same effect on money supply as raising the reserve requirement? a) The central bank decreases the interest rate. b) The central bank purchases bonds in the market. c) The central bank purchases securities and debentures in the market. d) Lower bond prices.
All else being equal, if a central bank buys government bonds from the market it would: a. mean savings in the economy are likely to increase. b. mean the supply of loanable funds would move to the left. c. increase the money supply. d. increase interest rates.
Which of the following would increase a bank’s Net Interest Margin, assuming all else stays the same? Choose Two an increase in the interest rate on its loans companies paying off some of their loans and the bank using the funds to purchase Treasury bonds customers switching a portion of their time deposits to demand deposits the bank issues additional equity and keeps the funds in cash an increase in the federal funds rate assuming the bank borrows more in the federal funds market than it lends
Which of the following actions cannot be used by banks to increase reserves? A. Sell Treasury bonds B. Sell loans C. Buy Treasury bonds D. Call loans
If the Fed buys loans from banks, what is the impact on the Loanable Funds Market? A) Decreases the supply of loanable funds and lowers the interest rate. B) Increases the supply of loanable funds and lowers the interest rate. C) Decreases the supply of loanable funds and raises the interest rate. D) Increases the supply of loanable funds and raises the interest rate.
Which of the following statements regarding the banks motives for holding reserves is incorrect ? A ) If banks on average expect an increase in policy rates they will be inclined to decrease their reserve holdings. B ) As the opportunity cost of holding reserves increase ,ceteris paribus banks are expected to decreasetheir holdings. C ) Depending on the volatility of fund inflows and outflows banks adjust the amount of their reserve holdings accordingly. D ) Under instable financial conditions banks are inclined to hold higher amounts of reserves compared to normal levels.
1. How has deregulation of the financial services industry affected the makeup offinancial intermediaries? How do you think intermediaries’ characteristics willchange in the future? 2. How do banking organizations in the United States differ from banking organizationsin other countries? Why are they different? 3. How is money created in a banking system that has fractional reserve requirements(i.e., a fractional reserve system)? 4. Describe the open market operations undertaken by the Federal Reserve. Whattype of trades would the Fed make if it wanted to increase interest rates? 5. How would funds—that is, the money supply—in the United States be affectedif the Federal Reserve increases reserve requirements? Give an example.
How do you think the shape of the yield curve for commercial paper and other money market instruments compares to the yield cure for treasury securities? Explain your own interpretation. Many financial institutions borrow heavily in the money markets using mortgages and montages backed securities as collateral. How do you explain the impact of the credit crisis on deficit and surplus units that participate in the money market? Do you think that the money market should be regulated to ensure proper collateral in the money market? Can you explain how activities in the secondary T-bill market are conducted? How can this kind of activity benefit investors in T-bills? Why might a financial institution sometimes consider T-bills as a potential source of funds?
27.Which of the following statements are true?Statement I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities because this enables them to maintain liquidity. Statement II. Financial institutions manage their liquidity by participating in money markets. They may issue money market securities when they experience cash shortages and need to boost liquidity. They can also sell holdings of money market securities to obtain cash.Statement III. The value of a money market security represents the future value of the present cash flows generated by that security. Since money market securities represent debt, their expected cash flows are typically known.Statement IV. The pricing of money market securities changes in response to a shift in the required rate of return by investors. The…
Which of the following statements are true?I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities because this enables them to maintain liquidity.II. Financial institutions manage their liquidity by participating in money markets. They may issue moneymarket securities when they experience cash shortages and need to boost liquidity. They can also sell holdings of money market securities to obtain cash.III. The value of a money market security represents the future value of the present cash flows generated by that security. Since money market securities represent debt, their expected cash flows are typically known.IV. The pricing of money market securities changes in response to a shift in the required rate of return by investors. The required rate of return changes in response to…
When any central bank wanted to increase the money supply and loosen credit conditions, what would it do in the private market for government bonds? Explain how this is supposed to affect the economy.