savers to spenders by lending funds (reserves) held on deposit. Also banks trans
ID: 1121090 • Letter: S
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savers to spenders by lending funds (reserves) held on deposit. Also banks transfer money barsks can create additional money by making loams in excess of total reserves reduce loan activity at will willingness by banks to lend money, not enough borrowers wiling to borrow T E 17. The banking system creates any desired level of money supply it allowed to expand or creates 18-There are four major constraints on the banking system, not enough depositors. money from the banks, and government regulation 1 E 19-Thecore of the Federal Reserve System consists of twelve (12) regional reserve banks. IE 20. The primary role of Federal Reserve Banks is to perform the following services clearing banks between private banks, holding bank reserves, issuing currency to banks, and providing loans By the President of the United States and confirmed by the U.S. Senate. responsible for fed's daily activities in financial markets consisting of regional bank IE 21. The Federal Reserve Board of Governors consists of eight (8) members appointed TE 22. A key arm of the Federal Reserve is the Open Market Committee (FOME) which is presidents. TE 23. The Federal Reserve control of the nation's money supply is exercised by the use of three policy instruments; reserve requirement, discount rate, and open market operations TE 24. By raising the required reserve ratio the fed can immediately reduce the lending capacity of the entire banking system. TE 25. A change in reserve requirement hits the bank with a triple whammy: excess reserves, the money multiplier, and the lending capacity of the entire banking system. 26. A bond is a certificate acknowledging a debt and the amount of interest to be paid 27. A yield is the rate of return on a bond, the annual interest payment divided by th 28. The principal objective of the open market activities of the Federal Reserve is t Reserve Bank open market operations offers to pay a higher pr TE each year until repayment on the lou bonds' price directly alter the reserve of the banking system. the bonds (bids up bonds") it will effectively lower bond yields and market i TE TE TE 29. If the Federal rates. TE 30. To increase the money supply the Federal Reserve banks will have to, lowe requirements, reduce the discount rate, buy bonds.Explanation / Answer
16. T Banks get money from depositers and give it to lenders
17. F It cannot be determined automatically
18. T
19. T Banks in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco
20. F Loan cannot be provided
21. F seven members
22. T
23. T
24. T As money supply gets blocked with reserve ratio
25. T
26. T Bond can be corporate bondsor treasury bills
27. T Yield=1/Price
28. T
29. T Inverse relation between price and yield
30. T Buying back bonds will induce money supply
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