How did the financial crisis of 2007–2009 affect the size and composition of the

Question

How did the financial crisis of 2007–2009 affect the size and composition of the balance sheet of the Federal Reserve? Answer yes or no to each of the following:

-On the liability side of the balance sheet, commercial bank deposits declined dramatically..unanswered

-The assets on the Federal Reserve's balance sheet increased by 2.5 times, mostly in the form of securities.unanswered

-On the liability side of the balance sheet, commercial bank deposits rose dramatically.unanswered

-The Fed broadened the range of assets held to include riskier instruments.unanswered

-The assets on the Federal Reserve's balance sheet decreased by 2.5 times, mostly in the form of loans.unanswered

-The Fed narrowed the range of assets held to include safer instruments.

Explanation / Answer

Solution-

1. On the liability side of the balance sheet, commercial bank deposits declined dramatically.

The answer is No.

2. The assets on the Federal Reserve's balance sheet increased by 2.5 times, mostly in the form of securities.

The answer is Yes.

3. On the liability side of the balance sheet, commercial bank deposits rise dramatically.

The answer is Yes.

4. The Fed broadened the range of assets held to include riskier instruments.

The answer is Yes.

5. The assets on the Federal Reserve's balance sheet decreased by 2.5 times, mostly in the form of loans.

The answer is No.

Reason-

Between December 2007 and December 2009, the assets of the Federal Reserve's balance sheet increased 2.5 times. Securities are heavily promoted and repaid because they increase the types of securities involved in securities held with riskier mortgages.Debt also increased significantly and, with extraordinary measures, on account of the balance sheet of debt repaid to commercial-banks, liquidity crisis can increase the commercial bank's deposits, so that the banks can be kept on higher amounts, whereas the Treasury raised the Federal Reserve's deposit on the amount of the deposited by the Treasury.

Note : As per chegg policy we can solve only 4 but i solved 1 extra for you, Thank You.

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.