And so I think there is some real concern that the Fed may have to do even more than it had previously anticipated when it comes to raising interest rates in an attempt to slow down the economy and get us back on to some sort of sustainable pace that we all feel good and comfortable with over time.ĭAVIES: All right. And it also looks like inflation might be picking back up. It looks like the economy's picking back up over some measures. Unfortunately, we've been getting January data over recent weeks, and they seem to sort of contradict that narrative. And at the same time, it felt like the economy was cooling off a little bit. It seemed like it was slowing down pretty steadily, really from about June until December. We had a really hopeful moment toward the end of last year where it seemed like inflation was slowing down. I would say inflation remains very rapid in America. SMIALEK: So far, we are not doing fantastically well. If we look at what's happened over the past year or so, the Fed trying to cut interest rates and beat inflation, how are we doing? What can we expect in the coming year or so? JEANNA SMIALEK: Thank you so much for having me.ĭAVIES: There's a lot of news coming in about the economy all the time. Well, Jeanna Smialek, welcome to FRESH AIR. Her new book is "Limitless: The Federal Reserve Takes On A New Age Of Crisis." Jeanna Smialek previously covered economics at Bloomberg News and wrote feature stories for Businessweek magazine. That's partly due to extraordinary circumstances, like a global pandemic, and partly due to changing expectations from a country that wants more accountability, more fairness and more diversity. And in recent years, it's expanded its reach and taken on new policy roles. In a new book, she says, yes, the Fed is powerful, probably even more powerful than you think. She writes about the economy and covers the Fed for The New York Times. But what or who exactly is the Fed? Well, our guest Jeanna Smialek's job is to trek deep into the jungles of financial management, get to know the players and understand their language, then share her knowledge with the rest of us. It makes it more expensive to buy a home or car, and it makes it harder for businesses to borrow and expand, which, over time, slows the economy down and reduces employment. And if you follow economic news, you know that the Federal Reserve Board, aka the Fed, is trying to cut inflation by raising interest rates, which can have its own troubling impacts. If you do your family's shopping, you know inflation is a problem these days. All of these statements describe the requirements.This is FRESH AIR. Bank regulators require that banks hold sufficient capital to ensure that depositors can be repaid.ĭ. Because banks are highly leveraged, a small decline in the value of bank assets can have a huge impact on bank capital.Ĭ. Bank capital is the owners' equity in the bank.ī. All of these D Which of these statements describes bank capital, leverage, and capital requirements:Ī. All of these E The Fed can control the money supply with:Į. False D The money supply depends on the:ĭ. All of these statements are true True Fractional reserve banking creates money because each dollar of reserves generates many dollars of demand deposits.ī. Money supply controlled by the central bankĮ. Types: commodity money (has intrinsic value), fiat money (no intrinsic value)ĭ. Functions: medium of exchange, store of value, unit of accountĬ. Definition: the stock of assets used for transactionsī. Decrease, selling E Which of the following statements is true about money?Ī. But the Fed can hold the money supply constant by _ bonds in open-market operations.ĭ. If the Fed does nothing, the money supply will tend to _. Decrease, selling D Suppose that a change in transaction technology increases the amount of currency people want to hold relative to demand deposits. Deposits, less B Suppose that a change in transaction technology reduces the amount of currency people want to hold relative to demand deposits. Deposits, less A Because of leverage, a 5-percent increase in the value of a bank's assets will cause the value of the bank's _ to rise by _ than 5 percent.ĭ. Decrease, decrease A Because of leverage, a 5-percent decline in the value of a bank's assets will cause the value of the bank's _ to fall by _ than 5 percent.ĭ. D If the Federal Reserve increases the interest rate it pays on reserves, it will tend to _ the money multiplier and _ the money supply.ĭ.
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