10 If all banks in America were member banks, explain why the Federal Reserve could be certain that the federal funds rate fell between the deposit rate and the discount rate?O A. The Federal Reserve can exercise great control over member banks and would be able to mandate that the federal funds rate fall between the deposit rate and the discount rate.O B. Given all banks are member banks, there would be no incentive to lend at a rate lower than the deposit rate or to borrow at a rate higher than the discount rate.Oc. Given member banks determine the federal funds rate through the interaction of supply and demand, the Federal Reserve cannot keep the federal funds rate fall between the deposit rate and the discount rate.In Figure 23-3, the federal funds rate falls slightly below the deposit rate. Explain, using the balance sheet below for a non-member bank, how this would happen. Non-member banks hold part of their required reserves as deposits at memberbanks.Non-member bankAssets (billions, $)Liablities (billions, $)Currency 50Checkable deposits 500Deposits at memberbank 20Loans 330Bonds 100O A. This non-member bank is short reserves and may be able to borrow them at a rate lower than the deposit rate if there are a lot of non-member banks holding excess reserves but few non-member banks looking to borrow reserves.O BThis non-member bank is short reserves and may be able to borrow them at a rate lower than the deposit rate if there are only a few non-member banks holding excess reserves but many non-member banks looking to borrow reserves.O c. This non-member bank is holding excess reserves and may agree to lend them at a rate lower than the deposit rate if there are a lot of non-member banks holding excess reserves but few non-member banks looking to borrow reserves.O D. This non-member bank is holding excess reserves and may agree to lend them at a rate lower than the deposit rate if there are only a few non-member banks holding excess reserves but many non-member banks looking to borrowreserves. If the reserve ratio is 10% and a member bank that can place funds on deposit at the Federal Reserve has the balancesheet below, does this bank have excess reserves?BankAssets (billions, $)Liablities (billion:Currency 60Deposits at Fed 50Checkable deposiNoLoans 600YesBonds 290If the deposit rate is 0.5% and the federal funds rate is 0.4%, what is the profit-maximizing choice for the overnight placement of reserves for the member bank?O A. deposit 10 billion at the Federal ReserveO B. make one day loans of 10 billion at the federal funds rateOC. borrow 10 billion at the federal funds rateO D. borrow 10 billion from the Federal ReserveIf the reserve ratio is 10% and a member bank that can place funds on deposit at the Federal Reserve has the balance sheet below, does this bank have excess reserves?BankAssets (billions, $)Liablities (billions, $)Currency 30Checkable deposits 1000Deposits at Fed 50Loans 600Bonds 320If the discount rate is 0.75% and the federal funds rate is 0.8%, what is the profit-maximizing choice for the overnight placement of reserves for the member bank?O A. borrow 20 billion from the discount windowO B. lend 20 billion at the federal funds rateOC. borrow 20 billion at the federal funds rateO D. lend 20 billion to the discount window

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If all banks in America were member banks, explain why the Federal Reserve could be certain that the federal funds rate fell between the deposit rate and the discount rate?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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