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Topic: Federal Reserve and the Central Bank Question : What is the difference between illiquid banks and insolvent banks? How does that difference affect the lender-of-last-

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Topic: Federal Reserve and the Central Bank

Question : What is the difference between illiquid banks and insolvent banks? How does that difference affect the lender-of-last-resort role of central banks?

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A bank run can bankrupt a healthy bank because of all of the following EXCEPT which one? Bank will suffer a huge loss when it is forced to sell its non-cash assets in a short time period. Bank's cash in the vault is only a fraction of its total deposits. This bank has a lot of non-performing loans. On average bank's liabilities are always more liquid than its assets.
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Question 12 The federal funds rate is the interest rate at which: prominent companies borrow from banks. banks borrow funds directly from the Federal Reserve. banks borrow from other banks with excess reserves. households' savings are invested in the Federal Reserve.
no explanation necessary
QUESTION 23 LAST CHANCE BANK OF TOMBSTONE --- BALANCE SHET ASSETS LIABILITIES & NET WORTH demand deposits: $5,000,000 cash in the vault: deposits at Fed US treasury bonds: $900,000 $100,000 $300,000 $3,700,000 $2,000,000 loans: Building: capital stock: $2,000,000 TOTALS: $7,000,000 TOTALS: $7,000,000 23. Assume: a required reserve ratio of 20%, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. Now assume this bank has just received an additional $100,000 in cash as a loan from another bank, such that the cash it will hold in its vault will increase to $1,000,000. What is the maximum amount of new money the banking system can create? $900,000 $400,000 $500,000 $1,000,000 $4,000,000
Over the last 10 years the Federal Reserve has substantially changed the way it operates. What is different about how the Federal Reserve now conducts policy? options: it discusses its policy in public and asks for guidance from Congress it gives the public forward guidance on what it will do It is more secretive about interest rate and other policy changes it places fewer regulations on commercial banks
QUESTION 16 The federal funds rate should never go above which of the following: the risk-free rate the interest rate paid on excess reserves the rate of inflation the rate at which banks can borrow from the Federal Reserve the zero-lower bound
The regional Federal Reserve Banks Question 47 options: a are not allowed to make loans to banks in their region. b have more voting members on the FOMC than does the Board of Governors. c are each headed by a member of the Board of Governors. d regulate banks in their regions.
I only need Help with part (B)
11
MODULE 3: THE BANKING LAWS AND REGULATIONS LEARNING ASSESSMENT M3B PROBLEMS 1. For each of the following economic changes, predict what will happen to equilibrium interest rate and quantity of money in the financial market. Sketch a demand and supply diagram to support your answers. (Letter A is solved/ answered as a sample of how you are to present the answers for the remaining letters.) A. Gross domestic product (GDP) in the economy increases. MS, i, MD2 MD, Quantity of money Since GDP increase will cause an increase in money demand, this causes the equilibrium interest rate in the money market to rise. The equilibrium quantity of money is constant at Q since MS is fixed. (Now do the rest of the problems.) B. The BSP changes its bank regulations in a way that makes it cheaper and easier for banks to make loans. C. People gain confidence that the economy is growing and that their jobs are secure. D. Banks that have made loans find that a larger number of people than they expected are…