Considering changes to the monetary base, are discount loans and federal funds borrowing equivalent? Explain.
What will be an ideal response?
When a bank borrows in the federal funds market reserves are just being moved from one bank to another so the monetary base does not change. As we learned in the chapter, the banking system does not have the ability to create or destroy the monetary base. When a bank borrows directly from the Fed by obtaining a discount loan, this increases the Fed's balance sheet, adding the asset of the loan and the liability of the reserves to their balance sheet. The injection of the reserves does increase the monetary base and as we saw can have an impact on the money supply. So in terms of the impact on the monetary base, a discount loan and borrowing in the federal funds market are not equivalent.
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A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day
The firm's average variable cost and marginal cost is a constant $20 per book. What is the publisher's profit-maximizing level of output? A) 60 books per day B) 80 books per day C) 100 books per day D) 120 books per day
Refer to the above table. If opportunity costs are constant, then the United States and Mexico will produce goods in which they have a comparative advantage and trade at a rate of exchange of
A) 4 computers for 1 bicycle. B) 6 computers for 1 bicycle. C) 0.1 computer for 1 bicycle. D) 1 computer for 1 bicycle.
The two main categories of U.S. exports are
a. transportation goods and fuel b. steel and fuel c. capital goods and industrial supplies and materials d. fuels and agricultural goods e. agricultural and transportation goods
Which of the following sets of economic data is minimizing the cost of producing a given level of output?
A. MPL = 20, MPK = 40, w = $32, r = $16. B. MPL = 40, MPK = 40, w = $16, r = $32. C. MPL = 40, MPK = 20, w = $16, r = $32. D. MPL = 20, MPK = 40, w = $16, r = $32.