Question 1

When banks decide to increase their reserves, the money supply will holding all else constant).

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Question 2

Name three actions the Fed can take to increase the money supply.

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Question 3

Trace the effects on the money supply when the Fed decreases the discount rate.

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Question 4

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

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Question 5

What is the Term Auction Facility?

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Question 6

When the Fed purchases government bonds the money supply and the federal funds rate .

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Question 7

What is bank insolvancy?

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Question 8

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

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Question 9

The is the interest rate at which banks make overnight loans to other banks.

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Question 10

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

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Question 11

List two reasons why the Fed cannot control the exact size of the money supply.

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Question 12

Discuss why the Fed rarely changes the reserve requirements.

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Question 13

Describe the role of the Federal Deposit Insurance Corporation FDIC).

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Question 14

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

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Question 15

When the federal funds rate is below the target rate, the Fed will bonds.
This action will the money supply.

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Question 16

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

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Question 17

The interest rate charged by the Fed to member banks is called the .

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Question 18

Describe how the use of leverage affects the impact of bank investments.

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Quiz 21: The Monetary System