42. A depository institution\'s profit is derived from the difference between at

Question

42. A depository institution's profit is derived from the difference between athe interest rate it receives on loans and the rate it receives on investments in government secuntics b the interest rate it pays on deposits and the rate it receives on loans. c the difference between its total reserves and its required reserves. d. the difference between its assets and its liabilities e. the interest rate it receives on domestic loans and the rate it receives on Eurodollar loans 43. Which of the following statements is not true? a. The Federal Reserve Open Market Committee determines fiscal policy actions for b. The Board of Governors of the Federal Reserve is appointed, not elected. e. The Federal Reserve System was designed to be independent of the executive branch of d. The chairman of the Board of Governors serves a four-year term. e. The Federal Reserve districts are distributed geographically to serve the particular interests of each region. Which of the following is not a function of the Fed? a. 44. Lending funds to private businesses b. Making loans to banks c. Regulating the money supply d. Providing currency e. Acting as a banker for the federal government 45. Monetary policy tools include all the following except a changing interest rate ceilings b. selling government bonds e. determining the discount rate. d. buying government bonds e changing the reserve requirement. 46. All the following decrease the money supply except a an increase in the discount rate b. an increase in the reserve requirement. c. open markei purchases by the Fed d. the Fed selling government bonds. e. an increase in the federal funds rate. 47. In a fractional reserve banking system, a banks can never experience a banking panic. b. bank reserves are always greater than bank loans. c. banks keep less than 100 percent of deposits in cash. d. total reserves always equal required reserves. e. bank reserves need to be backed by gold.

Explanation / Answer

42) b) The depository institution's profit is derived from the difference between the interest rate it pays on deposits and the rate it receives on loans. The interest rate is the most important factor here as it determines how much the institution must pay and how much it receives. This also determines its profit.

43) c) The Federal Reserve system was designed to be independent of the executive branch of government. Its monetary policy decisions do not have to be approved by anyone in the executive or legislative branches of the government or by the president.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

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