Which of the following statements are NOT correct:

a. The Federal Funds Rate is the interest rate at which member banks may borrow shortterm

funds directly from a Federal Reserve Bank

b. In a reverse repo, a central bank lends securities for a set period, temporarily draining

cash from the banking system

c. As part of its response to the recent crisis, the Federal Reserve expanded its traditional

tool of open market operations to support the functioning of credit markets through

the purchase of longer-term Treasury and mortgage-backed securities

d. Movements in overseas interest rates can lead to changes in New Zealand market rates

even if the OCR has not changed

e. None of the above answers.

A US bank facing a cash-flow shortfall because of large net deposit outflows may opt for

which of the following:

a. Borrow from other banks in the interbank lending market at an interest rate known as

the federal funds rate

b. Use a repurchase agreement (repo) selling some of its securities to another bank or

securities dealer with the promise to buy it back at later date at an interest known as

the repo rate

c. Acquire reserves by borrowing from the Fed at a rate known as the discount rate

d. All of the above answers are feasible choices

e. None of the above answers are feasible choices.