Multiple choices1. Banks face liquidity risk becauseA) they can have difficulty meeting their depositor's demands to withdraw money.B) they are unable to borrow from the Federal Reserve.C) households and businesses may seek to borrow a large amount of funds in a short period of time.D) governments tend to run high budget deficits.2. The original intention of the Fed's role as lender of last resort was to make loans to banks that wereA) not illiquid nor insolvent.B) illiquid, but not insolvent.C) insolvent, but not illiquid.D) both illiquid and insolvent.3. Why might a nation seek to maintain a pegged exchange rate?A) It makes business planning easier for firms involved in the global economy.B) It removes the need to intervene in the foreign exchange market.C) It ensures that the exchange rate will remain at its equilibrium.D) It makes their currency more attractive on the foreign exchange market.4. Suppose a country pegs its currency. If investors start to believe the peg will collapse and the currency is going todepreciate, as the government defends the peg the interest rate willA) Not move as interest rates must remain constant in a pegB) Increase to maintain the pegC) Decrease to maintain the pegD) It depends on the inflation rate is low or high compared to the country to which the currency is pegged.5. When the Fed extends loans to depository institutionsA) it increases the level of reserves.B) it decreases the level of reserves.C) it reduces the total value of the assets on its balance sheet.D) it reduces the total value of the liabilities on its balance sheet.6. If the Fed buys securities worth $10 million, thenA) bank reserves will increase by $10 million.B) bank reserves will decrease by $10 million.C) currency in circulation will increase by $10 million.D) bank holdings of securities increase by $10 million.7. If the Fed purchases $1 million in securities from the nonbank public, the monetary base will rise by $1 millionA) if the public holds the proceeds as currency.B) if the public deposits the proceeds as checkable deposits.C) if the public deposits the proceeds with the Treasury in a monetary base account.D) whether the public holds the proceeds as currency or deposits them as checkable deposits.8. The aggregate M1 consists ofA) currency plus all deposits in financial institutions.B) currency plus savings deposits in financial institutions.C) currency plus checkable deposits in financial institutions.D) currency.9. If the Fed purchases $1 million worth of securities and the required reserve ratio is 8%, by how much will depositsincrease (assuming no change in excess reserves or the public's currency holdings)?A) rise by $1 millionB) decline by $1 millionC) rise by $8 millionD) rise by $12.5 million10. opose the required reserve ratio is 8% and the Fed purchases $100 million worth of Treasury bills from Wells Fargo.Suppose Wells Fargo didn't have excess reserves, then by how much is Wells Fargo able to increase its loans?A) $8 millionB) $92 millionC) $100 millionD) $1.25 billion11. If banks hold no excess reserves, checkable deposits total $1.5 billion, currency totals $400 million, and the requiredreserve ratio is 10%, then the monetary base equalsA) $550 million.B) $1.54 billion.C) $1.9 billionD) $15 billion.

“Since you have posted multiple questions, we will provide the solution only to the first question…

Multiple choices 1. Banks face liquidity risk because A) they can have difficulty meeting their depositor's demands to withdraw money. B) they are unable to borrow from the Federal Reserve. C) households and businesses may seek to borrow a large amount of funds in a short period of time. D) governments tend to run high budget deficits.

Multiple choices 1. Banks face liquidity risk because A) they can have difficulty meeting their depositor's demands to withdraw money. B) they are unable to borrow from the Federal Reserve. C) households and businesses may seek to borrow a large amount of funds in a short period of time. D) governments tend to run high budget deficits.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

24)To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S. Congress used two government-sponsored enterprises (GSEs) called, ________. The GSEs role was to sell bonds to investors and use the funds to purchase mortgages from _______. Select one: a. the Fed and the Treasury Department; Households b. the Fed and Treasury Department; Banks c. Fannie Mae and Freddie Mac; Households d. Fannie Mae and Freddie Mac; Banks e. Fannie Mae and Freddie Mac; Investment Banks
Mary is paid on the 1st of every month and her rent is due on the 15th of every month. This is an example of the Group of answer choices money management problem. nonsynchronization of income and spending. cash flow problem. financial float.
37. Quantitative easing is Group of answer choices Providing guarantees for Commercial loans. The bailout of the banks by the Federal Reserve The buying of hundreds of billions in long-term government debt by the Federal Reserve in an effort to bring down long-term interest rates. Reducing the Federal funds rate to 0%
Please explain option a,b,c
1
Please answer the both questions I will give you Upvote 1) Why is a financial crisis likely to lead to a contraction in economic activity? a. None of the above are correct. b. Those that borrow funds to finance productive investment opportunities will have a greater opportunity to obtain financing. c. A disruption in the financial system diminishes the flow of funds from savers to borrowers. d. Disruptions in the financial system decreases asymmetric information, thereby decreasing the associated problems of adverse selection and moral hazard. 2) Suppose the Federal Reserve is selling $10 million of bonds to First National Bank. What is the impact on reserves and the monetary base? a. Reserves fall by $4 million and the Monetary Base falls by $4 million. b. Reserves rise by $2 million and the Monetary Base rises by $2 million. c. Reserves fall by $2 million and the Monetary Base rises by $2 million. d. Reserves fall by $2 million and the Monetary Base falls by $2 million.
Aa31 Economics During the 2008/09 recession, the Fed bailed out 25 percent of banks to keep them solvent. t/f
Answer the following questions using any tools at your disposal. More credit will be given for answers that use the graphical tools presented in class, along with a “story.” A. The federal government ran a budget surplus in the late 1990 and in the year 2000, but has since returned to running a budget deficit. 2. Explain why expansionary monetary policy would help decrease the likelihood of a recession if it were adopted at the same time the budget deficit was being reduced.
17)What is a "subprime mortgage," and would a subprime borrower be likely to pay a higher or a lower interest rate than a borrower with a better credit history? Select one: a. Loans granted to borrowers with flawed credit histories; a higher interest rate. b. Loans granted to borrowers with the best credit histories; a lower interest rate. c. Loans granted to borrowers with flawed credit histories; a lower interest rate. d. Loans granted to borrowers with the best credit histories; a higher interest rate.
1. Deficits and debt. Take an example 2. Understanding economic growth. Take an example. 3. Quantity theory of money. Take an example
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have a higher likelihood of default. They are made to people with relatively poor credit history. They are made to people with relatively few assets. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. Which of the following contributed to the growth of these mortgages? Check all that apply. Decreased regulation of the financial sector A shift to lower-risk investments by investors The Federal Reserve setting low interest rates in the early part of the 2000s The expectation that housing prices would keep rising
1-Increase in the budget deficit shifts the demand for loanable funds to the right. Select one: a. True b. False 2- The demand for liquid cash in the economy is based on _____________ Select one: a. Interest rates & average prices in the economy b. Credit card facility c. All of the above d. ATM machine availability Clear my choice