1.The reserves of commercial banks are assets to commercial banks and liabilitie
ID: 1105641 • Letter: 1
Question
1.The reserves of commercial banks are assets to commercial banks and liabilities of the Federal Reserve System.
True or False
2.(Last Word) Which of the following best explains why there may exist a negative lower bound for interest rates, beyond which lowering interest rates is counterproductive?
Multiple Choice
a.Negative lower bounds refer only to real rates of interest, not nominal rates.
b.Because of the premium that banks charge on loans over what they pay depositors, up to a point they are always guaranteed to earn a positive rate of interest.
c.Depositors will be willing to accept small negative interest rates in exchange for the convenience of being able to make electronic transactions.
d.The rate of deflation that one would expect at the negative lower bound would keep real interest rates at or above zero.
3.In 2008, at the depth of the Great Recession, the Fed moved toward a ZIRP when it aimed to keep the Federal funds rate between
Multiple Choice
a.1.0 percent and 1.25 percent.
b.2 percent and 2.5 percent.
c.2.5 percent and 3.0 percent.
d. 0 and 0.25 percent.
6. The use of monetary policy to shift aggregate demand to the right in a severe recession is like
Multiple Choice
a.pushing on a string.
b.putting all your eggs in one basket.
c.pushing the envelope.
d. pulling on one's purse-strings.
Explanation / Answer
First question is answered below
1.
Reserves of commercial banks is the money available with commercial banks in the form of required reserves and excess reserves. The required reserves are money kept with Fed (for emergency purposes) making it a liability for Fed and the excesss reserves are the total money the commercial banks can loan out, making them an asset for commercial banks.
Thus the given statement is TRUE
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