Question

1. Interest rates can fall to zero, but this does not mean that banks will be able to lend out more money.

True / False

2. The president of the New York Federal Reserve Bank serves as a permanent member of the Open Market Committee.

True / False

3.After being without a central bank from 1833 to 1913, Congress passed the Federal Reserve Act which established our present central bank.

true / false

4. Which of the following is a true statement?

a. Considering the Volcker Rule, lawmakers made it clear that whatever the shape of the final rule, it would not interfere with the liquidity of the U.S. Treasury market.

b. The Volcker Rule has built in exemptions for U.S. government bonds and commodities.

c. The Volcker Rule is an example of regulators grappling with an impossible problem - how to prohibit proprietary bond trading while preserving bank activities favorable to the U.S. government.

d. All of the above.

Answer 1

As we know that ,despite low returns, near-zero interest rates lower the cost of borrowing, which can help spur spending on business capital, investments and household expenditures.Banks with little capital to lend were hit particularly hard by the financial crisis. Low interest rates can also raise asset prices.

1). The correct option is,( false).

When interest rates falls to zero bank will lend more money to consumers and small business.

2). The correct option is (True).

The president of the Federal Reserve Bank of New York holds a permanent seat on the FOMC because a large amount of financial activity takes place in New York City and because the New York Fed is responsible for executing open market operations.

3). The correct option is (true).

The 1913 Federal Reserve Act created the Federal Reserve System, known simply as "The Fed". It was implemented to establish economic stability in the U.S. by introducing a Central Bank to oversee monetary policy. The Fed is the central bank of the USA.

4). The correct option is (d).

All of the above.

The Volcker Rule is a federal regulation that generally prohibits banks from conducting certain investment activities with their own accounts and limits their dealings with hedge funds and private equity funds, also called covered funds.

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