What is a banking panic, and what role did banking panics play in the decision by Congress to establish the Federal Reserve?
What will be an ideal response?
When the Fed was founded, its primary responsibility was to make discount loans to banks in order to deal with the bank panics, which occurred when many banks suffered from large withdrawals by depositors.
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Refer to Figure 4.1. Suppose Alvin chooses Top, while Simon chooses Down, and Theodore chooses Left. Theodore's payoff will be
A) 4. B) 6. C) 14. D) 24.
Differentiate between a socially-optimal price and a fair-returns price
What will be an ideal response?
Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.20. Ceteris paribus, if the reserve requirement is increased to 0.25, then excess reserves will:
A. Increase by $250 million. B. Increase by $50 million. C. Decrease by $250 million. D. Decrease by $50 million.
Demand deposits are a type of
a. checking account. b. time deposit. c. money market mutual fund. d. savings deposit.