If a bank has less rate-sensitive liabilities than assets, a decline in interest rates will... .the bank's profits. O A. increase O B. decrease OC. stabilize O D. none of the above
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- Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.Suppose the required reserve ratio increased from 5 percent to 10 percent, and suppose banks kept no excess reserves. Ceteris paribus, it follows that the "money" (or "deposit") multiplier would: Select one: O a. decrease from 20 to 10. O b. increase from 5 to 10. O c. decrease from 10 to 20. O d. decrease from 1/5 to1/10.16. Suppose that the Federal Reserve conducts an open market operation in which it purchases $100 in US Treasury bonds from a private saver. (a) In an economy without banks, by how much, in dollar terms, will the total money supply increase as a result of this open market operation? (b) In an economy with banks in which all members of the nonbank public immedi- ately deposit all of the currency they receive, but in which all banks engage in 100 percent reserve banking, by how much will the total money supply increase as a result of this open market operation? (c) In an economy with banks, in which all banks choose a 10% reserve ratio and in which all members of the nonbank public immediately deposit all of the currency they receive, by how much will the total money supply increase as a result of this open market operation? (d) In an economy with banks, in which all banks choose a 10% reserve ratio, but in which all members of the nonbank public hold 50% of the funds they receive as…
- When Vladimir sells bonds and gets money, his liquidity O A. and interest do not change. B. increases and he gains interest. O C. decreases and he gives up interest. O D. decreases and he gains interest. O E. increases and he gives up interest.Cash: $129.25 billion Checking deposits: $207.4 billion Saving accounts: $273.5 billion Small denomination time deposits: $27.3 billion Bank reserves held at the Fed: $43.0 billion Suppose that in a certain economy, the above are the only forms of money. How big is the monetary base (MB)? O a. $508.20 billion O b. $364.15 billion O c. $610.15 billion O d. $316.50 billion O e. $172.25 billion O f. $653.15 billionAccording to this theory of the term structure, bonds of different maturities are not substitutes for one another. Select one: O a. Segmented markets theory O b. Expectations theory O c. Liquidity premium theory O d. Separable markets theory
- Suppose the Board of Governors has determined that housing bubbles can be detrimental to the economy and try to cool down the economy. To accomplish this goal, they would most likely pursue policies that promote: O lower interest rates and an expansion of bank lending activity. O higher interest rates and a contraction of bank lending activity. O higher interest rates and an expansion of bank lending activity. O lower interest rates and a contraction of bank lending activity.Table 29-6. Reserves Loans O $106,000 O $60,000 O $72,000 Assets O $50,200 Bank of Springfield $19,200 228,000 Refer to Table 29-6. Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase? Deposits Liabilities $240,000If Janet expects interest rates to rise in the near future, she will probably be willing to Select one: O a. maintain only the current holding of bonds. O b. O c. buy bonds now, and hold less money. put her money under her mattress rather than in a bank account. O d. buy bonds now, but only if their price falls. O e. sell bonds now, and hold more money.
- Which of the following statements about money that is correct? O A. In the United States today, money consists of currency and deposits at banks and other depository institutions. O B. Money is a completely stable store of value. OC. Credit cards and debit cards are examples of money. O D. Inflation brings a rising value of money.When a bank suffers deposit outflows and has no excess reserves, the bank will generally first try to raise the funds by O A. calling in some loans. B. borrowing from the Fed. C. selling some of its securities. D. selling some loans. Suppose that a bank has $80 in checkable deposits, reserves of $15, and a reserve requirement of 10%. Also assume that the the bank suffers a $10 deposit outflow. If the bank chooses to borrow from the Fed to meet its reserve requirement, then the bank would need to borrow $. (Round your response to the nearest two decimal place.)Which of the following statements best explains why the money demand curve slopes downward? Select one: O a. At high interest rates, the opportunity cost of holding money is low, so people want to hold more. O b. As GDP increases, the demand for money tends to decrease, resulting in a negatively sloped curve. At low interest rates, the opportunity cost of holding money is low, so people want to hold more. O d. At high interest rates, people want to hold more money, so they don't have to borrow to make purchases.