5 Written Questions

1. Reserves in excess of required reserves
2. The ability of the central bank to set the goals of monetary policy
3. Purchase or sale of eligible assets by the European Central Bank under repurchase agreements or credit operations against eligible assets as collateral that are reversed within two weeks
4. Cash items in process of collection at the Fed minus deferred-availability cash items
5. The interest rate charged by the European Central Bank for borrowing at its marginal lending facility

5 Matching Questions

1. Central Bank
2. Matched Sale-Purchase Transaction (reverse repo)
3. Hedge
4. Simple Deposit Multiplier
5. Virtual Bank

1. a To protect oneself against risk
2. b The multiple increase in deposits generated from an in crease in the banking system's reserves in a simple model in which the behavior of depositor and bank plays no role
3. c A bank that has no building but rather exists only in cyberspace
4. d An arrangement whereby the Fed sells securities and the buyer agrees to sell them back to the Fed in the near futures; sometimes called a reveres repo
5. e The government agency that oversees the banking system and is responsible for the amount of money and credit supplied in the economy

5 Multiple Choice Questions

1. Bank holding companies similar in size to money center banks, but whose headquarters are not based in one of the money center cities (New York, Chicago, San Francisco)
   1. Superregional Banks
   2. Federal Reserve Banks
   3. Central Bank
   4. Community Banks
2. An arrangement in which any balances above a certain amount in a corporation's checking account at the end of a business day are "swept out" of the account and invested in overnight repos that pay the corporation interest
   1. Virtual Bank
   2. Float
   3. Basel Accord
   4. Sweep Account
3. A bank's capital divided by its assets
   1. Securitization
   2. Central Bank
   3. Leverage Ratio
   4. Reverse Transactions
4. An accounting method in which assets are valued in the balance sheets at what they would sell for in the market
   1. Open Market Purchase
   2. Mark-to-Market Accounting
   3. Open Market Operations
   4. High-Powered Money
5. Weekly reverse transactions (purchase or sale of eligible assets under repurchase agreements or credit operations against eligible assets as collateral) that are reversed within two weeks and are the primary monetary policy tool of the European Central Bank
   1. Main Refinancing Operations
   2. Dynamic Open Market Operations
   3. Longer-Term Refinancing Operations
   4. Bank Holding Companies

5 True/False Questions

1. Nonborrowed Monetary Base → The monetary base minus discount loans (borrowed reserves)

   True        False

2. Primary Dealers → Low and stable inflation

   True        False

3. Overnight Cash Rate → The interest rate for very-short-term interbank loans in the euro area

   True        False

4. Reserves → Additional offices of banks that conduct banking operations

   True        False

5. Open Market Purchase → The Fed's buying or selling of bonds in the open market

   True        False