questions: 1: which institutions failed at alarmingly high rates during the late
ID: 1115322 • Letter: Q
Question
questions:
1: which institutions failed at alarmingly high rates during the late 1980s and early 1990s, following period of regulation?
2: which group makes the main decisions concerning the federal reserve's policy on the buying and selling of U.S goverment securities?
3: if keith exchange dollars per pesos when the exchange rate is 5 peso to 1 dollar, he has made money by engaging in what activity?
4:suppose that disposable income is $1.000, consumption is $700, and the MPC is 0.6. if disposable income then increase by $100, comsuption and savings will equal what ?
5:the federal reserve regulations require me to put down at lease 50% of the purchase price of stock as a down payment. what is the 50% called?
6: approximately how much wealth will be created as a result of $5000 deposit if the reserve ratio is 15% and people of reserves in cash ?
Explanation / Answer
Answer 1.
The Banking & Finance sector failed during this period. There was critical situation for the Banking Legislation. After 1980, various legislate reforms were attempted by Congress to the financial services industry and its regulatory structure. DIDMCA (deregulation) in 1980 was the first change in industry structure and it was followed by legislation in 1982, 1987, 1989, and 1991. Moreover, few years passed without the presence of substantial banking bills on the legislative calendar. In the past, many big changes in banking legislation (notably the Federal Reserve Act of 1913 and the Banking Act of 1933) were reaponsible for financial crises.
Answer 2.
The Fed mainly has 3 tools to influence monetary policy:
(1) Open Market Operations- This is the most important tool. The Fed buys and sells U.S. government securities in the financial markets, which influences the level of reserves in banks. These decisions affects the price of interest rates. The Fed independently doesn't decide about dealing with securities rather the choice arises from an open market where there is a competition among the various securities' dealers.
(2) Setting the Discount Rate
The discount rate is the interest rate that banks pay on short-term loans from a Federal Reserve Bank, which is usually lower than the federal funds rate. The Federal Open Market Committee meets eight times a year to set the fed funds rate. The discount rate is important because it gives the rest of the market insight into the Fed's plans.
(3) Setting Reserve Requirements
This is to specify the amount of physical funds that depository institutions are required to hold in reserve against deposits in bank accounts. The Fed determines how much money banks can create through loans and investments. The Board of Governors has sole authority over changes in reserve requirements w.e.f. Jan. 1, 2018, the requirement is a reserve of 10% of deposits for banks with more than $115.1 million on deposit, and a reserve of 3% for banks with $115.1 million or less, but more than $15.5.
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