1. In aggregate, households are deficit spending units. 2. Only financial instit

Question

1. In aggregate, households are deficit spending units. 2. Only financial institutions are subject to Fed oversight. 3. An initial public offering of equity is a form of direct investment. 4. All financial claims have a primary market. 5. All financial claims have a secondary market. 6. In terms of $-volume outstanding in the US, the mortgage-backed security market is bigger than the corporate bond market. 7. The SEC regulates only primary markets. 8. Private placements are less marketable than registered securities. 9. Typically, treasury bills are the money market instrument with the highest volume outstanding. 10. Money market instruments are generally traded on organized exchanges. 11. The Fed sets the Fed funds rate. 12. The Fed is in charge of implementing fiscal policy. 13. If inflation was higher than the Fed’s targeted rate, the Fed would be likely to sell treasuries. 14. The US Treasury is active in monetary policy. 15. The US dollar is backed by gold reserves. 16. An increase in required reserves would lead to an increase in the money supply. 17. Banks must provide collateral to borrow at the discount window. 18. Banks must provide collateral to borrow in the fed funds market. 19. The Fed discount rate is typically greater than the fed funds rate of the same maturity. 20. When the Fed sells treasury securities it increases the money supply. 21. Quantitative easing was mainly an attempt to lower interest rates. 22. Federal Reserve governors are nominated by the President. 23. The Federal Reserve cannot intervene in the actions of nonbank firms. 24. The Fed is directly under the control of Congress. 25. The Fed is funded by Congress. _____________________________________________________________________ 26. FDIC insurance guarantees deposits up to a. $50,000 b. $100,000 c. $250,000 d. $500,000 e. all amounts 27. The _______ rate is the interbank borrowing rate a. discount b. fed funds c. prime rate d. none of the above 28. The Fed’s dual mandate is to I. keep long-term interest rates low II. promote maximum employment III. stabilize prices a. I and II only b. I and III only c. II and III only d. I, II and III 29. There are _________ regional Federal Reserve banks. a. 1 b. 12 c. 50 d. thousands 30. During the Depression, ___________ US banks failed. a. 100 b. 1,000 c. 10,000 d. 100,000

Explanation / Answer

26. C. The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. For a basic category-by-category overview of FDIC deposit insurance coverage.

27. B.  Federal Funds Rate is the Interbank loan rate on offer for funds. while Prime rate is the rate at which banks charge thier most trustworthy customers.

28.C. The Federal Reserve's "Dual Mandate": The Evolution of an Idea. Since 1977, theFederal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate.".

29. B. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve Act of 1913.

30. 10000 banks failed during the depression, in which 4000 failed in a year.

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