23. When Bank A borrows reserves in the federal funds market, it causes the tota
ID: 1103098 • Letter: 2
Question
23. When Bank A borrows reserves in the federal funds market, it causes the total reserves in the banking system to increase.
True or false
29.The last transaction in the federal funds market occurred in 2008 because
Multiple Choice
a.the Federal Reserve closed down the federal funds market.
b.in response to the financial crisis, the Federal Reserve raised the reserve ratio to 100 percent.
c.since the financial crisis, nearly every bank has significant excess reserves.
d.the federal funds rate has been set too high.
Explanation / Answer
Answer:- When Bank A borrows reserves in the federal funds market, it causes the total reserves in the banking system to increase.
False
Reason:- it will decrease the total reserves in the banking system
Answer:- The last transaction in the federal funds market occurred in 2008 because
Correct Answer:- c.since the financial crisis, nearly every bank has significant excess reserves.
Reason:- Due to the financial crisis, American banks have increased their excess reserves, which is the cash funds the banks hold over and above the Federal Reserve’s requirements. Excess reserves have increased from $1.9 billion in August 2008 to $2.6 trillion in January 2015
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