Ch. 17 terms

Question 1

FED balance sheet, what happens?

Answer 1

• Assets and Liabilities usually shrink or grow together
• Liability side depends more on what is occurring outside of the fed.
• When Fed buys MBS or T-bills (securities) from banks in the market Assets go up by how much they took in.

Question 2

Central bank assets

Answer 2

Securities, foreign exchange reserves, and loans.

Question 3

Central bank liabilities

Answer 3

Currency, governments account, and reserves.

Question 4

Monetary Base =

Answer 4

Currency + Reserves

Question 5

Central bank increases balance sheet by

Answer 5

Purchasing securities, extending loan to commercial bank.

Question 6

Central bank decreases balance sheet by

Answer 6

Sale of domestic or foreign securities

Question 7

Change of Fed balance sheet from 2008 to 2014

Answer 7

900B to 2.3T in 2008, 2014 it is 4.5T

Question 8

Money Multiplier

Answer 8

MM=(1+(C/D) / ((C/D) + Rd + (ER/D))

Question 9

Why doesn’t Fed like to use interest rates to affect the MS

Answer 9

They can only control 2/4 of the ratios

Question 10

WHat’s important about our $1?

Answer 10

Legal tender for all debts public and private, fed reserve not.

Question 11

Pressure points of FED during the crisis

Answer 11

• -Bought more long term bonds (500b)
• -Commercial paper, company couldn’t do it.
• -Liquidity swaps with other nations.
• -Sold a ton of treasuries