1 Which of the folling can be described as involving indirect finance?
a. You make a loan to your neighbor.
b. A corporation buys a share of common stock issued by another corporation.
c. You buy a U.S. Treasury bill from the U.S. Treasury.
d. You make a deposit at a bank.
2 Which of the following do banks hold as insurance against the high cost of deposit outflows?
a. Excess reserves.
b. Secondary reserves
c. Bank equity capital
d. Each of the above
e. only (a) and (b) of the above
3 If the First National Bank has a gap equal to a negative$30 million,then a 5%point increast in interest rates will cause profits to
a. increase by $15 million
b. increase by $1.5 million
c. decline by $15 million
d. decline by $1.5 million
4 When the Fed wants to increase the level of reserves in the banking system, it can
a. purchase government bonds
b. sell government bonds
c. extend discount loans to banks
d. do both (a) and (c)
5 Which of the folling is not an operating target?
a. nonborrowed reserves
b. monetary base
c. Federal funds interest rate
d. discount rate
6 Disadvantages of using reserve requirements to control the money include
a. their overly-powerful impact on the money suppply.
b. creating potential liquidity problems for banks with low excess reserves.
c. both (a) and (b) of the above
d. neither (a) nor (b) of the above
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