Question

In: Economics

When the Social Security Administration holds U.S. Treasury Bonds there is a balanced budget. interagency borrowing...

When the Social Security Administration holds U.S. Treasury Bonds

there is a balanced budget.

interagency borrowing has occurred and the government owes itself.

the gross public debt has increased.

an entitlement has occurred.

QUESTION 12

In a fractional reserve banking system

banks are required to keep all deposits on hand so that they can pay their depositors when they desire to withdraw funds.

banks do not keep sufficient reserves on hand to cover 100 percent of their depositors' accounts.

banks are required to keep a fraction of all deposits on hand and send the rest to the Fed.

banks are required to keep a fraction of deposits in bonds.

QUESTION 15

If an asset can be obtained or disposed of without much risk of losing its nominal value, it is said to be

liquid.

wealth.

fiduciary.

valuable.

QUESTION 16

A "banker's bank" is another name for

the Federal Depository Insurance Agency.

a financial intermediary.

a government bank.

a central bank.

QUESTION 17

The opportunity cost of holding excess reserves is equal to

the federal funds rate.

the discount rate.

the federal funds rate minus the discount rate.

none of the above.

QUESTION 18

Under the Fed's current interest- rate- targeting approach to monetary policy, if the demand for federal funds by depository institutions increases today, then, other things being equal

		the market federal funds rate decreases, and the Fed's Trading Desk responds by buying bonds.
		the market federal funds rate increases, and the Fed's Trading Desk responds by selling bonds.
		the market federal funds rate decreases, and the Fed's Trading Desk responds by selling bonds.
		the market federal funds rate increases, and the Fed's Trading Desk responds by buying bonds.

Expert Solution

First Question. Interagency borrowing has occurred and the government owes itself.

Explanation: When Social Security Administration holds U.S. Treasury Bonds, this means borrowing from one government agency to another one. So, the government owes to itself.

12. banks do not keep sufficient reserves on hand to cover 100 percent of their depositors' accounts.

Explanation: In a fractional reserve banking system, only a fraction of bank deposits are backed by actual cash on hand with the bank which it makes available for withdrawal to the customers.

15. Liquid

Explanation: A liquid asset can be easily converted into cash.

16. A central bank

Explanation: A central bank is the central monetary authority in an economy and it controls the banking system.

17. none of the above.

Explanation: The opportunity cost here is the federal funds rate minus the interest rate paid on excess reserves

18. the market federal funds rate increases and the Fed's Trading Desk responds by buying bonds.

Explanation: The increase in demand for federal funds would increase the market federal funds rate. So, in order to keep the interest rate at the same level, the Fed needs to increase the money supply. The Fed does this by buying bonds.

Rahul Sunny answered 2 years ago

A wealthy investor holds $700,000 worth of U.S. Treasury bonds. These bonds are currently being quoted...

A wealthy investor holds $700,000 worth of U.S. Treasury bonds. These bonds are currently being quoted at 105105 % of par. The investor is concerned, however, that rates are headed up over the next six months, and he would like to do something to protect this bond portfolio. His broker advises him to set up a hedge using T-bond futures contracts. Assume these contracts are now trading at 110 -12. a. Briefly describe how the investor would set up this...

A wealthy investor holds $600,000 worth of U.S. Treasury bonds. These bonds are currently being quoted...

A wealthy investor holds $600,000 worth of U.S. Treasury bonds. These bonds are currently being quoted at 107% of par. The investor is concerned, however, that rates are headed up over the next six months, and he would like to do something to protect this bond portfolio. His broker advises him to set up a hedge usingT-bond futures contracts. Assume these contracts are now trading at 111-00 a. Briefly describe how the investor would set up this hedge. Would he...

Is it true that U.S. Treasury security is risk free? Why is it that municipal bonds...

Is it true that U.S. Treasury security is risk free? Why is it that municipal bonds are not taxed at the federal level, but are taxable across state lines? Why is it that U.S. Treasury bonds are not taxable at the state level? (You may need to dust off the history books for this one.)

Your friend owns some U.S. Treasury zero-coupon bonds with 5years to maturity. He holds the...

Your friend owns some U.S. Treasury zero-coupon bonds with 5 years to maturity. He holds the securities for duration matching to his liabilities. In the past month, the treasury bond yield has dropped from 3% to 1%. While from the above news article, the yield of corporate zero-coupon bonds with the same maturity has increased from 6% to 12%. Observing the changes, your friend wants to sell the (low-yield) treasury bonds currently owned and use the proceeds to buy (high-yield)...

Consider the role of Social Security in the size of the projected U.S. government budget deficits...

Consider the role of Social Security in the size of the projected U.S. government budget deficits in the coming years. • What is the central problem for Social Security? • What are some proposed solutions to this problem? What do you see as the costs and benefits (disadvantages and advantages) of these various solutions? (Remember that costs and benefits do not have to be strictly monetary—they can involve other criteria as well.) • Draw conclusions about what approach we should...

Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury...

Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within one year and investors typically roll over the matured Treasury bill and purchase another Treasury bill the same day. Treasury notes have maturities of up to 10 years. You are considering investing $50,000 in a Treasury bill that you will renew every 6 months or invest in a Treasury note that you will hold until maturity. Your investment time frame is...

2. Consider the impact on the market for U.S. Treasury bonds when there are unusually high...

2. Consider the impact on the market for U.S. Treasury bonds when there are unusually high returns in the U.S. stock market. What changes in the market for U.S. Treasury bonds? What happens to the equilibrium, price, quantity, and interest rate on U.S. Treasury bonds? **Select ALL that apply. ** ___ Demand for U.S. Treasury bonds rises ___ Demand for U.S. Treasury bonds falls ___ Demand for U.S. Treasury bonds does not change ___ quantity increases ___ quantity decreases ___...

When the Government runs a budget deficit, it must sell Treasury bonds to finance that deficit....

When the Government runs a budget deficit, it must sell Treasury bonds to finance that deficit. To analyze the impact of increased government spending, assume the Treasury will be selling new 1-year Treasury bills. Use a supply and demand for bonds model to determine what is likely to happen to interest rates on 1-year bills. (Explain your graph)

1. If the government sells U.S. Treasury bonds to finance its budget deficit, one would expect:...

1. If the government sells U.S. Treasury bonds to finance its budget deficit, one would expect: A. interest rates to rise. B. domestic investment to rise. C. tax rates to fall. D. inflation to rise. E. interest rates to fall. Suppose the real interest rate in the economy is 3% and the nominal interest rate is 6%, what is the current inflation rate? a. 18% b. 9% c. 2% d. 3% e. 2.5% Which of the following actions of the...

2) According to the Social Security Administration, in 2018 the average wages and earnings in the...

2) According to the Social Security Administration, in 2018 the average wages and earnings in the US was $50,000, the median was $32,838 and σ=$10,200 based on 167 million wage earners. a) From the above data, are earnings normally distributed? Explain your reasoning. b) Regardless of you answer above, assume wages and earnings are normally distributed. Construct a 95% confidence interval for the mean using the above data. c) Regardless of you answer above, assume wages and earnings are normally...