Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 14: Q8. (page 300)

What do economists mean when they say that the Federal Reserve Banks are central banks, quasi-public banks, and bankers’ banks?

Short Answer

Expert verified

By the above statement, economists imply that the Federal Reserve Bank serves the functions of a central bank, quasi-public bank, and banker’ bank.

Step by step solution

01

Step 1. Federal Reserve Bank as central bank, quasi-public bank, and banker’s bank

The 12 Federal Reserves of The United bank serves as the central bank, quasi-public bank, and banker’s bank in the following ways.

Central Bank: Most of the nations around the world have one central bank, which is the apex institution of their financial system.The United States has 12 Federal Reserves that serve as the central bank of the nation.

Quasi-public Bank: The Federal Reserves are knownas quasi-public banks since they blend public and private ownership.The banks are owned by private bodies but controlled by the board, a public body.

Bankers’ Bank: The Federal Reserves are known as bankers’ banks since they provide banking facilities to commercial banks, like commercial banks that accept deposits and grant loans to the general public.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Recall the formula that states that $V = 1/P, where V is the value of the dollar and P is the price level. If the price level falls from 1 to 0.75, what will happen to the value of the dollar?

a. It will rise by a third (33.3 percent).

b. It will rise by a quarter (25 percent).

c. It will fall by a quarter (−25 percent).

d. It will fall by a third (−33.3 percent).

Suppose the price level and value of the U.S. dollar in year 1 are 1 and $1, respectively. If the price level rises to 1.25 in year 2, what is the new value of the dollar? If, instead, the price level falls to 0.50, what is the value of the dollar?

Why do economists nearly uniformly support an independent Fed rather than one beholden directly to either the president or Congress?

An important reason why members of the Federal Reserve’s Board of Governors are each given extremely long, 14-year terms is to:

a. insulate members from political pressures that could result in inflation.

b. help older members avoid job searches before retiring.

c. attract younger people with lots of time left in their careers.

d. avoid the trouble of constantly having to deal with new members

James borrows $300,000 for a home from Bank A. Bank A resells the right to collect on that loan to Bank B. Bank B securitizes that loan with hundreds of others and sells the resulting security to a state pension plan, which at the same time purchases an insurance policy from a company called AIG that will pay off if James and the other people whose mortgages are in the security can’t pay off their mortgage loans. Suppose that James and all the other people can’t pay off their mortgages. Which financial entity is legally obligated to suffer the loss?

a. Bank A

b. Bank B

c. the state pension plan

d. AIG
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free