Bank reserves can be viewed as:
a. Profitable assets in a bank's portfolio.
b. Taxes on profits.
c. Assets that all banks should have in excess, if they want relatively high profits and relatively low risks.
d. All the above.
Question 2 - Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
b. There is not enough information to determine what happens to these two macroeconomic variables.
c. The real risk-free interest rate and net nonreserve-related international borrowing/lending remain the same.
d. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
e. The real risk-free interest rate falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
Question 3 - In the United States (and in this course), financial institutions' reserves include:
a. Cash in the vault and deposits at other institutions.
b. Cash in the vault and deposits at the central bank.
c. Cash in the vault and AAA corporate securities.
d. Currency in circulation and checking accounts.
e. Short-term Treasury bills and government deposits are institutions'.
Question 4 - Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and nominal value of the domestic currency falls.
b. There is not enough information to determine what happens to these two macroeconomic variables.
c. The real risk-free interest rate rises, and nominal value of the domestic currency falls.
d. The real risk-free interest rate rises, and nominal value of the domestic currency rises.
e. The real risk-free interest rate rises, and nominal value of the domestic currency remains the same.
Question 5 - The reserves of financial institutions:
a. Are assets that financial institution's try to keep at the legal limit.
b. Are made up mainly of government securities and high quality corporate bonds.
c. Include the liability called Borrowing from the central bank.
d. None of the above is correct.
e. Are the largest liability in a financial institution's balance sheet.
Question 6 - Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and real GDP remains the same.
b. The real risk-free interest rate rises, and real GDP falls.
c. The real risk-free interest rate and real GDP remain the same.
d. The real risk-free interest rate falls, and real GDP rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
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