Question

1. What is true about the Fed?

   		It is independent of the federal government
   		It serves other banks, not individual customers
   		It can make decision without polictical interference
   		All of the above

QUESTION 2

1. Consider an economy with a reserve requirement m=0.25. If some of the banks prefer to keep excess reserve, what is the actual value of the money multiplier

   		Equal to 4
   		Less than 4
   		Larger than 4
   		Zero

QUESTION 3

1. If a bank has $100 million in assets and $80 million in liability, what is the net worth of its stockholders?

   		$180 million
   		$20 million
   		$100 million
   		$80 million

QUESTION 4

1. What is true regarding default risk

   		It's the risk that the borrowers cannot repay their debts in full or on time
   		Default risk is higher during financial crisis
   		Default risk leads to non-zero risk premium
   		All of the above

QUESTION 5

1. What happen to the T-bills market when the Fed implements contractionary monetary policy?

   		Supply shifts to the right
   		Demand shifts to the left
   		Lower price and higher rate of return for T-bills
   		a and c is correct
   		All of the above

Answer 1

Ans 1:-

Option(d) All the above

Federal reserve system is the central bank of united state and it is independent of federal government (US government) which serves services to other banks insted of individuals.

Ans 2:-

Option(a) Equal to 4

as it is given above that reserve requirement is 0.25 then this means actual multiplier is 4.

Ans 3:-

Option(b) $20 million

in Balance sheet Asset = liability + Net worth

So networth = Asset - liability

I.e $100 - $ 80

=$ 20

Ans 4 :-

Option(d) All the above

Default risk is that the probability that an organization or individual are unable to form the desired payments on their debt obligation. Lenders and investors area unit exposed to default risk in just about all varieties of credit extensions. a better level of risk results in a better needed come back, and successively, a better rate.

Ans 5 :-

option(c)