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The Fed sells 5 billion worth of Treasury bonds on the open market?
It would stay the same gurrrl
What is a liability for the central bank?
If they issue treasury bonds (in the case of the US Fed).
Is interest om Federal Home Loan Bank bonds subject to federal income tax?
Yes. Interest from Fed Home Loan Bonds ARE federally taxable and generally are not taxed by states (I live in FL which does not have a state income tax).
How many ten dollar bills do you put in a bank bundle?
100, which will give you a $1,000 strap. A "bank bundle" as you put it is called a Fed Strap because that is how the treasury department sends the money to the banks. All denominations in Fed Straps are 100 bills per strap.
Can depository institutions create money using their excess reserves to loan money?
Yes. They can sell their reserves, which are really just deposits by banks at the Federal Reserve, to other banks or simply withdraw them from the Fed, replacing them with cash, and make loans with that cash or buy lending assets such as bonds. See "fractional reserve lending".Considering the record rise in reserves, we should expect a veritable tsunami of lending any minute. Commercial banks are holding a record proportion of cash predominantly in the form of those reserve deposits at the Fed. They're holding so much that they actually stand to lose money if they don't lend because of the cost of their liabilities versus the next to 0% rates of revenue from those excess reserves. See "borrow short, lend long" and "net interest margin".Another view holds that the currently high level of reserves on deposit with the Fed ($1.08T as of 10/28/09) will not be reduced without an explicit change in Fed or Treasury policy. The Fed only has a capital level of $52.5B as of 10/28/09. Therefore a material reduction in the amount of reserves would require a concurrent reduction in assets or an offsetting increase in liabilities to maintain the solvency of the Fed's balance sheet. A significant reduction in assets would require the sale of Treasuries and Agency securities held by the Fed and therefore a reversal of current Fed policy to purchase such securities to lower interest rates for mortgages. Prior examples of increased liabilities include the Treasury's Supplemental Financing Program(SPF) begun in September 2008 where Treasuries were sold and the proceeds deposited with the Fed in a special account. Recent constraints imposed by the current debt ceiling of $12.1T have led to reductions in the SPF account and offsetting increases in the level of reserves on deposit. From this point of view, the arrival of any tsunami of new lending will necessarily be preceded by explicit policy changes that should not be expected before an increase in the debt ceiling at least $500B over annual deficit requirements of about $1.4T or a Fed announcement that Treasury and Agency sales are to begin.High-powered money has doubled in the US in a 3 month period or so. All of that new cash is powerful enough to double the amount of credit in the US, currently $55t.This is all safe, for the moment, because we are rapidly deflating. Once we start inflating again, Mr. Bernanke will sell the assets on the Fed's balance sheet, and things will return to normal, removing the record amount of cash in the US.
The fed buys 5 billion worth of treasury bonds on the open market what effect does this have on the money supply?
The Fed sells $5 billion worth of Treasury bonds on the open market.
Why is the money supply decreased when the Fed sells some of its Treasury bonds?
Selling bonds decreases the amount of money that bondholders have in the bank.
Which of the following actions is most likely to result in an increase in the money supply?
The Fed buys millions of dollars in Treasury bonds
The Fed sells 5 billion worth of Treasury bonds on the open market?
It would stay the same gurrrl
Why is the money supply decreased when the fed sells some of its treasury bond?
Selling bonds decreases the amount of money that bondholders have in the bank.
What happens to the secondary market when the fed buys treasury bonds?
Prices tend to go up as demand has increased.
Which best describes the use of open market operations to influence the money supply?
The Fed buys and sells Treasury bonds in the bond market.
Which of the following actions is most likely to result in in an increase in the money supply?
The discount rate on overnight loans is lowered.
What best explains why the money supply is increased when the Fed buys Treasury bonds?
When the Fed buys Treasury bonds, it increases the amount of deposits in people's bank accounts.The purchase of bonds increases the amount of deposits in people's bank accounts, which enables banks to loan more money
What is a liability for the central bank?
If they issue treasury bonds (in the case of the US Fed).
What would happen if the Fed sells 5 billion worth of Treasury bonds on the open market.?
The money supply would stay the same because no new money would be created.
What would happen if the Fed sells 5 billion worth of treasury bonds on the open market?
The money supply would stay the same because no new money would be created.
