1)On March 4, 2014 the Federal Reserve Bank of New York purchased $1.225 billion
ID: 1163788 • Letter: 1
Question
1)On March 4, 2014 the Federal Reserve Bank of New York purchased $1.225 billion of Treasury Securities that had maturities between 2 and 5 years. True or False? 2) During the financial crisis of 2008-2009 and its aftermath the Federal Reserve purchased large quantities of securities on the open market. This expanded the liability side of the Fed’s balance sheet but not the asset side. This was necessary to revive the economy. True or False? 3)Federal Reserve Notes are liabilities of the US Treasury. True or False? 4)If a U.S. depository institution is short of federal reserve notes it can request that the Federal Reserve Bank in its district send it more Federal Reserve Notes. The depository institution would use its reserves at the Fed to pay for these notes. True or False?
Explanation / Answer
1) Solution: TRUE
Explanation: The Fed under its quantitative-easing stimulus strategy bought $1.225 billion of Treasuries due from Nov' 2039 and Aug' 2042 to hold down borrowing costs and improving the economic growth
2) Solution: FALSE
Explanation: During financial crisis of 2008-2009 and its aftermath, the US Federal Reserve expanded its balance sheet dramatically with addition of new assets and new liabilities without "sterilizing" these by corresponding subtractions.
3) Solution: FALSE
Explanation: Federal Reserve Notes are liability to the Federal Reserve System
4) Solution: TRUE
A U.S. depository institution, when it needs more currency to meet its customers' needs, asks a Reserve Bank to send it more Federal Reserve notes. It will be done with a reduction in the quantity of reserve balances that banks as well as other depository institutions hold in their Federal Reserve accounts
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