Which of the following is not part of the U.S. Federal Reserve System?

Bank One has $200 in reserves $1250 in loans $1275 in checkable deposits and $175 wo Show more Question 1 Bank One has $200 in reserves $1250 in loans $1275 in checkable deposits and $175 worth of capital. What is the maximum loss in loan value this bank can absorb without becoming insolvent? Answer $200 $175 $1275 $1250 3.33 points Question 2 Which part of the Federal Reserve system sets the required reserve ratio? Answer Board of Governors District Banks Discount window Comptroller of the currency 3.33 points Question 3 The Federal Open Market Committee includes all ___ members of the Board of Governors plus ____ presidents from different FR district banks Answer 5; 12 7; 5 7; 12 5; 7 3.33 points Question 4 Using the simple deposit multiplier model assuming the required reserve ratio is 5% find exactly how much the FR Bank needs to raise reserves in order to get deposit accounts to increase by exactly $500000. Answer $15000 $5000 $25000 $150000 3.33 points Question 5 The interest rate that the FR Bank charges commercial banks on loans issued direct from the FR Bank is called the Answer federal funds rate Treasury bill rate discount rate prime rate 3.33 points Question 6 Which of the following is the best example of a monetary target that a central bank might adopt as monetary policy conduct? Answer maintain the federal funds rate at 3.5% keep total non-borrowed reserves at $4.5 billion dollars M2 should grow at 2.5% a year maintain the required reserve ratio at 6% 3.33 points Question 7 Using the simple deposit multiplier model what is the required reserve ratio if an increase in reserves of $600 increases deposits by $24000? Answer 4.5% 3.5% 3% 2.5% 3.33 points Question 8 If the FR Bank sells ____ worth of securities in the open market to a commercial bank then reserves R ____. Answer $300; decrease by $300 $100; increase by $100 $300; decrease by $3000 $100; increase by $1000 3.33 points Question 9 Say that the FR Bank is targeting the federal funds rate to conduct monetary policy. If there is an increase in the demand for reserves and as a result the federal funds rate rises then to defend its target for a lower interest rate the FR Bank can Answer Raise the discount rate Increase the required reserve ratio Sell securities Buy securities 3.33 points Question 10 When the FR Bank buys $1 worth of securities in the open market in the simple multiplier model total deposits ___ by ___ than $1. Answer increase; less increase; more decrease; less decrease; more 3.33 points Question 11 In the market for reserves say that iff < id. An open market ____ shifts the supply curve to the ____ and causes the federal funds interest rate to fall. Answer sale; left sale; right purchase; left purchase; right 3.33 points Question 12 In the market for reserves suppose that iff < id. If the FR Bank wants to increase the interest rate banks pay for reserves it can Answer raise the discount rate buy securities lower the required reserve ratio sell securities 3.33 points Question 13 Suppose that a firm in the US produces a good that requires $400 in labor cost and $250 in capital costs. The firm exports to Canada and the exchange rate is currently $1 US buys 0.8 Canadian dollars. If the firm is charging 580 Canadian dollars for the good in Canada then the firm is making a profit in US dollars of Answer $55 $35 $75 $0 3.33 points Question 14 Say that three different commercial banks extend a loan to a corporation and each bank contributes one third of the loan. After the loan is issued the banks agree to monitor the borrower but each bank figures that since the other banks will monitor there is no point in monitoring the borrower themselves. This is a good example of Answer adverse selection a free rider problem why bank capital requirements do not work how the discount rate influences the level of non-borrowed reserves 3.33 points Question 15 Which of the following is not part of the U.S. Federal Reserve System? Answer District Banks Board of Governors Securities and Exchange Commission Federal Open Market Committee 3.33 points Question 16 Just prior to the financial crises that started in 2007 what was one of the initial conditions in the US? Answer depressed US housing market high interest rates low global savings deregulation of financial markets 3.33 points Question 17 In the market for reserves suppose the demand curve intersects supply on its horizontal segment to the right of the vertical segment. If the FR Bank raises the discount rate then the market interest rate that bank pays for reserves will Answer not change increase decrease none of the above 3.33 points Question 18 A borrower takes out a loan from a bank and can invest in a risky project that will produce revenue of $185 with probability 0.75 and revenue $125 with probability 0.25. The bank requires a loan repayment of $115. The other alternative for the borrower is to invest his loan in a non-risky project that will produce revenue of $165 with certainty. Then from the borrower’s perspective the expected payoff Answer on the risky project is highest on the non-risky project is highest on the two project is exactly the same none of the above 3.33 points Question 19 The price of a Big Mac in the US is $3.25 and the price of a Big Mac in Brazil is 46 Real. Then the exchange rate that satisfies the law of one price is ____ Real per $1 US. Answer 2.25 0.07 4.25 14.15 3.33 points Question 20 Say that in the federal funds market demand intersects supply at the vertical segment and iff < id. If the FR Bank lowers the discount rate it charges on discount loans then the rate that banks pay for reserves will? Answer increase decrease not change either decrease or not change can be correct 3.33 points Question 21 The price of a Big Mac is $4.01 in the US and 38 pesos in Mexico. The current exchange rate is $1 US buys 12 Mexican Pesos. Then according to the purchase power parity or the law of one price over time the US dollar should Answer appreciate depreciate not change none of the above 3.33 points Question 22 Consider the simple deposit multiplier model but assume that banks always keep any excess reserves rather than lend them out. If the FR Bank purchases $90 dollars worth of securities from a bank and the required reserve ratio is 10% then total deposits in the economy will increase by ____ and reserves will increase by ____. Answer $90; $90 $900; $90 $0; $90 $900; $0 3.33 points Question 23 When a home country’s currency depreciates its goods abroad become ____ expensive while foreign goods in the home country become ____ expensive. Answer more; less more; more less; more less; less 3.33 points Question 24 Suppose that an investor in the US claims the future value of a $100 in US bonds and Euro bonds is the same. The US interest rate is 6% the Euro interest rate is 10% and the current exchange rate Et is 0.6. Then for his claim to be true the future exchange rate Et+1 must be ____ . (find closest number) Answer 0.698 0.622 0.575 0.555 3.33 points Question 25 Say that the FR Bank purchases $1000 worth of securities from a commercial bank. If the required reserve ratio is 10% then the reserves in the economy increase by ____ and according to the simple deposit multiplier deposit accounts increase by ____. Answer $100; $1000 $100; $10000 $1000; $100 $1000; $10000 3.33 points Question 26 A bank issues a $100 loan to a borrower and required loan repayment is $125. The borrower who takes out the loan will make the full repayment with probability 0.85 but with probability 0.15 will only pay the bank $65. Then what is the expected loan repayment from the bank’s perspective? Answer $116 $102.25 $111.5 $107.75 3.33 points Question 27 In the market for reserves if iff < id then a decrease in the required reserve ratio shifts the demand curve to the ____ and causes the interest rate to ____. Answer left; rise right; rise right; fall left; fall 3.33 points Question 28 A US based investor can buy a US bond or an Australian bond. The US bond pays 9% interest and the Australian bond pays 5% interest. If the current exchange rate is Et= 1.5 and the future exchange rate is Et+1 = 1.4 then in terms of US dollars Answer the US bond has a higher future value the Australian bond has a higher future value both bonds have the same future value none of the above 3.33 points Question 29 The FR Bank conducts monetary policy and then finds out that the monetary base MB increased by $500. Then the policy that led to this outcome must be Answer Sold $1000 worth of securities to the non-bank public Bought $1000 worth of securities to the non-bank public Sold $500 worth of securities to a commercial bank Bought $500 worth of securities from a commercial bank 3.33 points Question 30 A bank’s total reserves minus its deposit account at the FR Bank is equal to the bank’s Answer excess reserves vault cash required reserves currency in circulation Show less

QUICK QUOTE

Approximately 250 words