Problem 5
A bank borrows \(\$ 100,000\) from the Fed, leaving a \(\$ 100,000\) Treasury bond on deposit with the Fed to serve as collateral for the loan. The discount rate that applies to the loan is 4 percent and the Fed is currently mandating a reserve ratio of 10 percent. How much of the \(\$ 100,000\) borrowed by the bank must it keep as required reserves? \(L O 34.3\) a. \(\$0\) b. \(\$ 4,000\) c. \(\$ 10,000\) d. \(\$ 100,000\)
Problem 7
If the Federal Reserve wants to increase the federal funds rate using open- market operations, it should bonds. LO34.4 a. Buy. b. Scll.
Problem 8
True or False: A liquidity trap occurs when expansionary monetary policy fails to work because an increase in bank reserves by the Fed does not lead to an increase in bank lending. LO34.6
Problem 9
True or False: In the United States, monetary policy has two key advantages over fiscal policy: (1) isolation from political pressure and (2) speed and flexibility. LO34.6
