Suppose that id > iff > ior, and then the FRB increases the required reserve ratio for commercial banks. Consequently, in the federal funds market, the equilibrium rate will.. (Please Explain Answer).
rise
fall
not change
none of the above
Correct option is (1).
When Fed increases the required reserves ratio, banks have lower excess reserves and therefore have less amount of money they can lend as cash. In federal funds market, less availability of reserves will shift the supply of reserves curve leftward, thus increasing the federal funds rate.
Suppose that id > iff > ior, and then the FRB increases the required reserve ratio...
Question 1 1 pts Suppose that in the market for reserves, the federal funds rate is both, less than the discount rate (iff < id), and above the rate paid on excess reserves (iff > Por). If the Federal Reserve Bank elects to decrease the required reserve ratio, then we would expect the_ curve for reserves to shift and the equilibrium interest rate to . O demand; fall O demand; rise o supply; rise O supply; fall
Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should it do? a. Increase the reserve requirement ratio. b. Buy bonds on the open market. c. Sell bonds on the open market. d. Lower taxes. e. Increase the discount rate. The interest rate at which banks can borrow funds from the Fed is known as… a. the federal funds rate. b. the discount rate. c. the prime rate. d. the real interest rate. e....
Please answer all the questions?, thank
you.
Question 1 1 pts The required reserve ratio is the: O actual amount of reserves that banks must hold excess amount of reserves that a bank must hold O minimum amount of reserves the Fed requires a bank to hold. O total amount of reserves that banks hold at all times. Question 2 1 pts The discount rate is the interest rate: O commercial banks charge their low-risk customers for a loan. O...
Q5(ch14). Suppose the required reserve ratio is 0.2. a. If an extra $30 billion in reserve is injected into the banking system through an open market purchase of bonds, how much can demand deposit increase? What if the required reserve ratio were 0.1? (2pts) b. Would your answer be different if banks want to hold reserves in excess of the required reserve? Explain briefly (2pts)
1.The Fed purchases $100,000 of U.S. government securities from One Bank. Assuming the desired reserve ratio is 10 percent, banks loan all excess reserves, and the currency drain is 20 percent, how much does the quantity of money increase? A. $1,000,000 B. $10,000,000 C. $1,100,000 D. $900,000 E. $100,000 2.A bank maximizes its stockholders' wealth by ______. A. colluding with other banks to keep interest rates high colluding with other banks to keep interest rates high B. lending for long...
Question 25 (12 points) Suppose the required reserve ratio is 5%. If the Fed sells $50 million worth of Treasury bonds, what will happen to the money supply? Describe any calculations made to support your answer. Based on your answer above, what will happen to interest rates in the bond market? Explain in detail how you came up with this response. Based on your answers above, what will happen to the federal funds rate? Explain in detail how you came...
ed b. The money supply increases, decreases, remains constant): when the required reserve ratio increases. when the discount rate decreases. when the Fed sells securities. when the currency drain ratio increases. when the excess reserve ratio decreases. c. d. e. The table below shows the balance sheet in millions of dollars) for three banks. a. Suppose the required reserve ratio is 5 percent. Fill in the table. Bank of East Los Angeles Assets Liabilities Deposit: RR: $120 ER: Bank of...
The reserve requirement sets the required percentage of vault cash plus deposits with the regional Federal Reserve Banks that banks must keep for their deposits. Many banks have widespread branches and ATMs. How would the existence of branches and ATMs affect the level of excess reserves (above those required) that banks are able to hold? ATMs require a lot of vault cash, thus increasing excess reserves. ATMs increase excess reserves, which increases the money multiplier. The existence of ATMs does...
(a). The required reserve ratio is 10%. If the Fed increases the amount of excess reserves in the banking system by $100,000,000, the maximum potential amount of additional money created in the economy will be ____ dollars. (b). The required reserve ratio is 10%, but due to economic uncertainty, banks are holding an additional 2.5% of their deposits as excess reserves. If the Fed increases the amount of excess reserves in the banking system by $100,000,000 through an open market...
4. Required reserve ratio If the Fed decreases the required reserve ratio, banks have to hold (more or fewer) reserves and thus the size of the money multiplier (decreases or increases) . Which of the following explain why the required reserve ratio is becoming a less useful tool in the conduct of monetary policy? Check all that apply. 1.Popularity of ATMs forces banks to hold on more cash. 2.Demand for money has fallen over time. 3.Popularity of ATMs reduces the...