HW #11 - Ch. 15
the federal deposit insurance corporation (fdic)....
-created moral hazard problems in that big banks take on more risk knowing the fdic will consider them "too big to fail" -was created in 1933 to prevent bank runs that had been plaguing the economy during the great depression -assures depositors their deposits will be full recoverable up to a max of 250,000 regardless of how serious a bank's financial situation may be
in regards to the federal reserve system, what is true
-established in 1913 -essentially independent -has primary responsibility for monetary policy
which is not a duty of the central bank -conduct monetary policy for its respective govt -provide financial services for private banks -performing banking functions for its respective govt -guarantee the savings of its citizens
-guarantee the savings of its citizens
which event caused congress to begin seriously looking at setting up the federal reserve system -the need to control inflation -the American people's loss of confidence in the nation's currency -some severe banking crisis at the end of the 19th century and early 20th century -world war 1
-some severe banking crisis at the end of the 19th century and early 20th century
what is the term for a board of governor member
14 years
the current chairman is...
Jerome powell
which of the following assets is the least liquid -3-month treasury bill -currency -a house -a share of publicly traded stock
a house bc takes the longest to get actual cash for it
what is true concerning a fractional reserve banking system
banks maintain a fraction of deposits on hand to meet the daily needs of their customers
a $20 federal reserve note is counted in...
both m1 and m2
a $50 traveler's check is counted in...
both m1 and m2
the interest rate charged by the federal reserve on loans to member banks is the...
discount rate
what backs up the value of US dollars
faith that the dollars represent command over goods/ services
t/f: the chairman of the board of governors can only serve one 4-year term as chairman
false
what is the definition of m2
m1 plus savings and small time deposits, retail money market mutual funds, and money market deposit accounts
a $25,000 money market deposit account is counted in...
m2 only
a $500 time deposit is counted in...
m2 only
Scott is seeking a loan from his bank for a home improvement project. He receives the loan and then decides to take a special vacation opportunity to Las Vegas and enter a gambling tournament. The bank, as a financial intermediary, is facing a problem of...
moral hazard since he used the money for a riskier proposition that he initially intended
Elisabeth get a new credit card w a limit of $5,000. what is this counted in
neither m1 or m2
a currency will cease to function as money if...
people think that they will not be able to use it to exchange for goods/ services later
when the fed acts as the lender of the last resort it means that...
the fed lends to depository institutions it deems should not fail
what are required services
the minimum amount of legal reserves that a depository institution must have to back up its checkable deposits
what are open market operations
the purchase and sale of existing US govt securities by the federal reserve
what is the definition of m1
the total value of currency plus transactions deposits plus non-bank traveler's checks
what is the basic structure of the federal reserve bank
there are 12 district banks, a board of governors, and a federal open market committee
why was the federal reserve system created
to counter periodic panics in the banking industry
the profits of the bok corp. were 1 mil. last year, less than the 5 mil profit of meep int. -this scenario shows how money functions as a...
unit of accounting