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.
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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
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- Economic conditions in Fredland have caused the demand for money to increase which has changed the nominal interest rate. If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that? Select one: O a. Raise the discount rate. O b. Increase taxes. O c. Decrease the reserve requirement. O d. Sell bonds. O e. Buy bonds.All else being equal, if a central bank sells government bonds from the market it would: a. decrease the money supply. b. decrease interest rates. c. mean the supply of loanable funds would move to the right. d. most likely decrease savings in the economy.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 bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow?A decrease in reserve requirements could lead to an A. increase in bank lending. B. increase in the money supply. C. increase in the discount rate. D. both A and B.With open market operations, the federal reserve sets the interest rate it lends to banks. Ture or false
- 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.How should a bank structure its liquid assets portfolio to take advantage of falling interest rates ? a. The bank should invest in short-term securities to minimise capital loss b. The bank should invest in long term securities to maximise capital gains. c. The bank should borrow at fixed interest rates d. The bank should issue certificate deposits with fixed interest rates. e. The bank should hold cash to maximise its interest income. Which option is correct3. Open market operations versus discount loans Consider an expansionary open market operation. Suppose the Federal Reserve buys government securities from the nonbank public. Suppose that the sellers of government securities cash the checks and hold on to the cash. Then, ceteris paribus, bank reserves do not change ▼ currency in circulation increases , and thus the monetary base will increase 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 the monetary base and thus affects
- 6) Bruce the Bank Manager can reduce interest rate risk by assets to increase their rate sensitivity or, alternatively, liabilities. A) shortening; lengthening B) shortening; shortening C) lengthening; lengthening D) lengthening; shortening the duration of the bank's the duration of the bank'sIf a bank wants to shorten its asset duration, what type of risk is the bank concerned about? Group of answer choices Off balance sheet risk. The risk of rising interest rates. The risk of falling interest rates. Foreign exchange rate risk.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?