Suppose the Fed makes a $5 million discount loan to a bank. Illustrate how this affects the balance sheets of the Fed and the banking system
What will be an ideal response?
The Fed's assets increase as discount loans rise by $5 million and its liabilities increase by $5 million as reserves increase. The banking system's assets increase as reserves rise by $5 million and its liabilities increase by $5 million due to the increase in discount loans.
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The economic way of thinking assumes a politician ignores
A) the costs of her actions. B) the benefits of her actions. C) her own interests after taking the oath of office. D) all of the above. E) none of the above.
Mortgage insurance protects lenders when a borrower defaults by making up any shortfall needed to repay the loan if the sale of the property doesn't cover the debt Federally regulated lenders must have mortgage insurance on loans where the buyer's down payment is less than 20 per cent of the price. In this example, what signal do potential homeowners give to indicate they are low-risk?
A) indicating high income B) buying an expensive home C) having a large down payment D) buying an inexpensive home