A) 5360 43) tf a bond dealer sells a government bond to the Fed for s100,000 and

Question

A) 5360 43) tf a bond dealer sells a government bond to the Fed for s100,000 and the 43) required reserve ratio is 10 percent, then the bank that receives a $100,000 deposit from the dealer can expand its loans by the money supply can increase by as much as and B) $90,000, $900,000 D) $10,000, 5100,000 C) $80,000, $800.000 44) 44) The discount rate is the interest rate charged by A) the Federal Reserve Bank for loans to the states B) the Federal Reserve Bank for loans to private banks C) the Federal Reserve Bank for loans to consumers D) the Federal Reserve Bank for lowns to the government 45) 45) The federal funds rate is the interest rate charged by A) the Federal Reserve Bank for loans to consumers B) banks for loans to the Federal Reserve Bank C) banks for loans to other banks D) the Federal Reserve Bank for loans to the U.S. Treasury 46) All of the following tend to decrease the money supply EXCEPT 46) A) increasing the difference between the discount rate and the federal funds rate B) an increasing the required reserve ratio. C) selling Us government securities D) engaging in open market purchases 47) Assuming a 25 percent required reserve ratio, the potential money 47) multiplier would be equal to A) 50 B) 4.0 C)3.0. 45) Due to the existence of the FDIC, banks 48)_ A) have not changed their behavior even with the existence of insurance B) are no longer concerned about net worth. C) become more cautious in making loans, D) may make riskier loans knowing that their depositors are insured. 49) Holding money as a medium of exchange to purchase goods and 49) services and make payments is known as the A) spending demand for money transactions demand for money

Explanation / Answer

(43) D. formula for money lending is M*Demand deposit i.e. 10%*100000 =10000 and

for money supply multiplier formula is 1/R i.e. 1/10 so money supply would be 10 time

(44) B It is minimum rate set by Fed to give loan to other banks

(45) C It is the rate on which one bank give loan to other overnight

(46) D Purchase securities from open market would increase money supply

(47) B money multiplier formula is 1/R

(48) B Because banks know that deposits are insured .

(49) B This is transaction purpose.

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