Exam 4: Financial Intermediaries and the Banking System

The Federal Reserve has decided it wants to increase interest rates by decreasing the money supply through deposits held at financial intermediaries.All else equal, if the reserve requirement is 10% for all deposits, and the Fed wants to decrease deposits by $100 million, which of the following actions should be taken? Assume no excess reserves exist in the banking system.

Financial intermediaries generally take deposits from many savers and loan all their funds to a single firm.

The Edge Act of 1919 permitted U.S.banks to create banking facilities in foreign countries that were regulated by the foreign government, not by the Federal Reserve.

Bank panics can cause an economic recession.

A small state bank currently has reserves equal to $300,000.If the state reserve requirement is 20%, but the bank feels more comfortable with maintaining a 30% reserve, what amount of deposits does the bank currently have?

The Federal Reserve can change the level of member bank reserves as well as reserve requirements.

Federal deposit insurance has

U.S.banks have been permitted to engage in a wider range of business activities in foreign countries than at home in order to be competitive with foreign banks.

A(n) ____ is a depository institution that is owned by its depositors, who are members of a common organization or association, such as an occupation, a religious group, or a community.

The Federal Reserve is an independently funded federal agency of Congress, thus is independent of the political processes of Washington.

Unlike the United States, many countries grant their banks the authority for

All else equal, a decrease in reserve requirements will cause

Financial intermediaries allow savers to provide the funds directly to the borrowers.

Depository institutions create money when they use their excess reserves to make loans or acquire new investments.

The primary tools of the Federal Reserve monetary policy include all of the following except

Which of the following powers or tools of Federal Reserve monetary policy has the greatest impact on the money supply?

Goldsmiths became banks when they began to hold fractional reserves and make loans.

The maximum change in the money supply created by a fractional reserve banking system decreases whenever reserve requirements are increased.

All of the following are reasons to regulate depository institutions except

The deposits of federal credit unions are insured by the Federal Deposit Insurance Corporation.