Help from Mobinil1 - 1Describe what is likely to happen to...

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Unformatted text preview: 1Describe what is likely to happen to interest rates, deposits, and total bank reserves as a result of the transactions listed below: a. The Federal Reserve sells $50 million in securities outright to a bank. b. The Federal Reserve buys $85 million in securities outright from a bank. c. The Federal Reserve sells $93 million in securities outright to a nonbank security dealer. d. The Federal Reserve buys $42 million in securities outright from a nonbank security dealer. e. The Federal Reserve sells $21 million in securities from its own portfolio to a foreign central bank. f. The Federal Reserve buys $37 million in securities for its own portfolio that are being offered for sale by a foreign central bank. g. The Federal Reserve declines the U.S. Treasurys offer to roll over $150 million in Treasury notes that are maturing in the Feds own portfolio in exchange for new Treasury notes; instead the Federal Reserve demands cash from the Treasury. 2Suppose the banking systems nonborrowed reserves total $48.3 billion, with total legal reserves standing at $51.2 billion. What must borrowed reserves be? This morning the Federal Reserve decided to undertake the sale of $500 million in government securities through open market operations. What will be the new level of nonborrowed reserves? If interest rates do not change, what will be the new level of total reserves? What must you assume to make this calculation? If interest rates do change, which way are they likely to move?interest rates do change, which way are they likely to move?...
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