Microsoft Word - Money, Banking, and Int Finance(scribd).docx

Money, Banking, and International Finance

Key Terms

securities
mortgage-backed securities
discount loans
Items in the Process of Collection (CIPC)
gold certificates
Special Drawing Rights (SDRs)
coins
Central Bank Liquidity Swap
bank premises
Federal Reserve notes
deposits by depository institutions

U.S. Treasury deposits

Foreign and other deposits

Deferred Availability Cash Items (DACI)

capital account

Federal Reserve float

monetizing the debt

foreign-exchange market intervention

international reserve

unsterilized foreign-exchange intervention

sterilized foreign-exchange intervention

Chapter Questions

1. Identify the Fed’s assets, liabilities, and capital.


2. Explain how the Federal Reserve clears a check between two banks.


3. Which factors influence the reserve float?


4. Identify the changes to the monetary base and money supply if bad weather causes the float
   to increase.


5. Identify the changes to the monetary base and money supply if the U.S. Treasury increases
   its deposits at the Federal Reserve.


6. Identify the changes to the monetary base and money supply if the commercial banks reduce
   the amount of discount loans from the Fed.


7. Which assets and liabilities the Fed cannot control?


8. Identify the changes to the monetary base and money supply if the U.S. Treasury changes
   the taxes or changes its borrowing behavior.


9. Explain how the Federal Reserve can monetize the U.S. debt if the Fed and the U.S.
   Treasury Department are independent.


10. Why do central banks and governments intervene in the foreign-exchange markets?


11. Distinguish between a “weak” dollar and “strong” dollar. How would a strong U.S. dollar
    affect the U.S. economy?