Question

QUESTION 1

In reaction the stress in the money markets in August of 2007 the FOMC lowered the target for the Fed Funds rate from 5.25% to 4.75% on August 10^th.

True

False

QUESTION 2

It was on December 16^th 2008 that the FOMC lowered the Target Fed Funds rate from 2% to a range of 0%-.25%.

True

False

QUESTION 3

The discount window at the Federal Reserve helps to relieve liquidity strains for individual depository institutions and for the banking system as a whole by providing a source of funding in time of need.

True

False  

QUESTION 4

When the Fed Funds rate increases the cost of credit to non-financial firms does not change since the Fed Funds rate is an inter-bank rate of interest.

True

False

QUESTION 5

A bank with insufficient reserves can increase its reserves by

		buying short-term Treasury securities.
		lending federal funds.
		buying municipal bonds.
		calling in loans.

Answer 1

1) False
Target was not reduced due to moderate growth

2) True
First time, the rates were reduced to below 1%

3) True
Discount window allows institutions to borrow short term money for liquidity needs

4) False
The fed funds rate is translated throughout the financial market

5) calling in loans
this will increase reserves as loans are called back