Explain the concept of 'lender of last resort'. What is discount rate?
When risky business prospects make commercial banks hesitant to extend new loans, or when banks are in trouble, the Fed will step in by lending money to the banks, thus inducing them to lend more to their customers. Mammoth amounts of central bank lending to commercial banks helped keep the financial system functioning and ease the panic, as seen in 2007, 2008, and 2009.
The discount rate is the interest rate the Fed charges on loans that it makes to banks. Federal Reserve officials can try to influence the amount banks borrow by manipulating the discount rate. If the Fed wants banks to have more reserves, it can reduce the interest rate that it charges on loans, thereby tempting banks to borrow more. Alternatively, it can soak up reserves by raising its rate and persuading the banks to reduce their borrowings.
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A friend claims that the United States is a net international debtor. The best way of testing this claim is to see whether
A) U.S. foreign liabilities exceeded U.S. foreign income. B) U.S. receipts from foreign assets exceeded U.S. payments to foreign owners of U.S. assets. C) U.S. official reserve assets were positive or negative. D) the United States ran a balance of payments surplus or deficit last year.
The more willing suppliers are to substitute away from a taxed good, _____
a. the larger the proportion of the tax paid by demanders b. the smaller the proportion of the tax paid by demanders c. the greater the increase in output will be d. a and c
Who appoints the Federal Reserve System's Board of Governors?
A) the Secretary of the Treasury B) the President of the United States C) the Speaker of the House of Representatives D) the American Banking Association
The Malthusian prospect of starvation of the population could be prevented by: a. increasing the amount of land available for agriculture
b. investing in research and development of new technologies. c. expanding food production on available land. d. all of the above