Suppose the Bank of Canada lowers its target for the overnight interest rate and longer-term interest rates in the market fall as a result. When this occurs, the commercial banks respond to in the demand for loans by... O a An increase; selling government securities to the Bank of Canada in exchange for cash, with which they can extend new loans. O b. A decrease; buying government securities from the Bank of Canada in exchange for cash, and calling in existing loans. O c. An increase; buying government securities from the Bank of Canada, against which they can extend new loans. O d. A decrease; selling government securities to the Bank of Canada and calling in existing loans. O e. An increase; borrowing cash from the Bank of Canada with which they can extend new loans.

Suppose the Bank of Canada lowers its target for the overnight interest rate and longer-term interest rates in the market fall as a result. When this occurs, the commercial banks respond to in the demand for loans by... O a An increase; selling government securities to the Bank of Canada in exchange for cash, with which they can extend new loans. O b. A decrease; buying government securities from the Bank of Canada in exchange for cash, and calling in existing loans. O c. An increase; buying government securities from the Bank of Canada, against which they can extend new loans. O d. A decrease; selling government securities to the Bank of Canada and calling in existing loans. O e. An increase; borrowing cash from the Bank of Canada with which they can extend new loans.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The functions of money are a. medium of exchange, the ability to buy goods and services, and checking accounts. O b. store of value, use as a barter mechanism, and unit of account. О с. medium of exchange, the ability to buy goods and services, and the ability to pay off debts. d. medium of exchange, unit of account, and store of value. e. credit cards, checking accounts, currency, and coins.
By using open market operations, the Federal Reserve O a. adjusts the supply AND demand of reserves to keep the federal funds interest rate equal to its target. O b. adjusts the supply of reserves to keep the federal funds interest rate equal to its target. Oc controls banks' demand for reserves, thereby keeping the federal funds rate equal to its target. O d. adjusts the demand of reserves to keep bank rates in line with the federal funds rate target. O e. None of these answers is correct.
Table 14 shows the balance sheet of the Tenth National Bank Assets Liabilities Reserves $517 Deposits $4,136 Loans $3,619 Total: $4,136 Total: $4,136 Refer to Table 14. Assume that this bank lends out its entire excess reserves. If Jerry deposits $426 of cash in a checking account in the Tenth National Bank, what's the maximum change in the money supply in the economy? O $2,982 G O $3,408 O $3,696 O $4,200 O $4,136
The following graph shows a hypothetical demand function for federal funds . Currently , the total amount of reserves in the banking system is $ 50 billion , the discount rate is 3.5 percent , and interest on reserves equals IOR = 1 percent . If the Fed reduces the discount rate to 3.00 percent , the equilibrium federal funds rate ( FFR ) will equal : O a . FFR 3.00% O b . FFR = 2.50% O c . FFR = 2.00% O d . FFR 1.50% O e . None of the above.
In a regime of abundant reserves, the highest possible level of the fed funds rate that is on the demand curve for reserves is determined by A. the rate of interest on reserve balances, IORB. O B. the primary credit discount rate. OC. the interest rate on three-month Treasury bills. D. the prime interest rate. In a regime of abundant reserves, the lowest possible level of the fed funds rate that is on the demand curve for reserves is determined by OA. the primary credit discount rate. OB. the rate of interest on reserve balances, IORB. O C. the prime interest rate
The interest rate commonly used by banks to borrow from each other outside the US, which is also used for revolving loans inside the US, is the O REPO O IEURO O LOREN O LIBOR
Banks create money by O a. buying U.S. government securities with cash. O b. printing money up to their required reserve limit. O c. creating deposits without limit. O d. making loans and creating deposits, a process that is limited by the size of banks' excess reserves. O e. printing dollar bills without limit.
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.
If the target rate of interest is lower than the equilibrium interest rate, the Federal Reserve will Treasury bills in the open market, the supply of money, and the interest rate to the target rate. O sell; increase; lower sell; decrease; raise O buy; decrease; raise O buy: increase; lower
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.
Which of the following actions by the Bank of Canada will result in an immediate increase of approximately $600 million in excess reserves for banks? (Assume a target reserve ratio of 30%.) OA. Transfer $600 million out of commercial bank deposits into its own accounts OB. Purchase $857 million of government securities from the non-bank public, because of the 30% target reserve ratio OC. Purchase $600 million of government securities from the non-bank public OD. Purchase less than $600 million of government securities from the non-bank public E. Sell $857 million of government securities to banks, because of the 30% target reserve ratio OF. Sell $600 million of government securities to banks G. Sell less than $600 million of government securities to banks
. A well-known bank has specialized in adjustable-rate mortgages. They have originated 7 billion USD in adjustable-rate mortgages. This bank generally raises money by borrowing with shorter term loans and issuing fixed-interest rate Certificates of Deposit. The bank has 6 billion in short-term adjustable-rate loans to partly help fund the loan portfolio. The federal reserve has announced an increase in their target interest rate of 50 basis points (0.5%). What is the equation and solution.