HW 02: Money and Federal Reserve

M1 includes:

coins, paper currency, check-able deposits

(currency + check-able deposits)

coins issued by....

US Treasery

Paper money consists of...

Federal Reserve Notes

M2 consists of

= M1 + near monies

>savings / MMDA

> CDs (<100,000)

>money market mutual funds (INDividual)

In the US economy, the money supply is controlled by the

Federal Reserve System

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes and bonds) is the

a) FDIC

b) Federal Bond Sale Authority

c) Council of Economic Advisers

d) Federal Open Market Committee

d) FOMC

Which statement describes the 12 Federal Reserve Banks?

a) They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.

a) duh

Subprime mortgage loan

high interest mortgage loan to people with higher than average credit risk

mortgage backed securities

bonds backed by mortgage payments

securitization

chopping up of mortgages and selling them as bonds

or

"bundling groups of loans, bonds, mortgages and other financial debts into new securities"

collateralize default swaps

a) helped reduce the losses from the mortgage default crisis

b) involve exchanging high risk mortgages for low risk mortgage backed securities

c) are loans to investors in mortgage backed securities

d) insured holders of loan backed securities in case the underlying loans were not repaid

d) insured holders of loan backed securities in case the underlying loans were not repaid

True / False:

The Great Recession was the main cause of the Financial Crisis of 2007-2008

False !!!

T/F:

Prior to financial crisis, many peeps were approved for mortgage loans even without proper documentation or credit checks

true silly

12 Federal Banks

1) central bank

2) quasi - public banks

3) bankers bank

1) 12 of them throughout US

2) do not deal with public, only interact with government, commercial banks and thrifts

3) "lender of last resort"

****FOMC

Financial Services Industry

1) commercial banks

2) thrifts

3) insurance companies

4) mutual fund companies

5) pension funds

6) security funds

7) investment banks

2) savings & loans associations

4) >pool deposits by customers to buy stocks / bonds

6) >buy/sell stocks for clients

>Merrill Lynch

7) help corporations / government make $$ by selling stocks & bonds

Financial Crisis of 2007-2008 started in which sector of the economy?

The housing and real estate sector

MAIN function of Federal Reserve System

control the money supply

Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for

1) setting Fed's monetary policy

2) directing the purchase and sale of government securities

The Federal Reserve System of the US is the country's ....

central bank

The Federal Reserve System was established by the Federal Reserve Act of

a) 1913

b) 1933

c) 1945

d) 1955

a) 1913

because FED Reid was 19 and TS lucky number is 13 !!!

The Federal Reserve Banks are owned by the ...

a) federal government

b) board of Governors

c) US Treasury

d) member banks

Board of Govenors