Lecture_4_Questions

Lecture_4_Questions - Lecture 4 Questions 1. Plot the fed...

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Lecture 4 Questions 1. Plot the fed funds rate for the period btw 1998-2008. (Hint: The fed funds rate btw 1998- 2003 should look really similar to the discount rate given on pg. 105 of your textbook.) Answer: You could use the data on: http://www.federalreserve.gov/releases/h15/data.htm 2. What happens to the Balance Sheets of the Federal Reserve Bank and a Member Bank when reserve requirements change? (e.g. if the reserve requirement drops from 10% to 5%) Answer: This question was meant to ask what happens to the balance sheets of the Federal Reserve Bank and a Member Bank immediately after a decrease in reserve requirements. Intuitively, the Member Bank can now use the excess reserves to make new loans. The excess reserves will also be redeposited to the bank. Therefore both liabilities and assets of the Member Bank will increase. The assets and liabilities of the Federal Reserve Bank will initially decrease because of this decrease in the reserve
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requirements. (Please look at pg. 108 of Saunders and Cornett (3rd edition) for more
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This note was uploaded on 10/16/2011 for the course FIN 353 taught by Professor Cobus during the Spring '08 term at S.F. State.

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Lecture_4_Questions - Lecture 4 Questions 1. Plot the fed...

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