Assignment:
Part 1 Financial Crises
1- What is a bank panic, and why can it worsen a recession?
2- Explain one of the causes of the 2007-2009 financial crisis.
3- Explain the shadow banking system?
4-What is the too-big-to-fail problem? Provide examples?
Part 2 Central Banks and the Federal Reserve System
1-Should the Fed be independent? Why?
2-Would the Fed be better off under the control of the President or Congress? Explain your point of view.
Part 3 The Money Supply Process
1-Who are the three players in the money supply process?
Part 4 Tools of Monetary Policy
1-What is an open market operation and how does it affect the market for reserves and the equilibrium federal funds rate?
2-What are the conventional monetary policy tools the Federal Reserve can use? Succinctly explain each one.
3-Explain one of the nonconventional monetary tools. What is "quantitative easing"?
4-What is the difference between "quantitative easing" and "credit easing"?
Part 5 The Conduct of Monetary Policy; Strategy and Tactics
1-Why are most central banks trying to stabilize prices?
2-The primary goal of most central banks is price stability. What are the five other goals of monetary policy? Succinctly explain each one.
3-What is the difference between a hierarchical mandate and a dual mandate? Provide examples.
4- is price stability a short-term goal of monetary policy? Explain.
5-What is "inflation targeting"? Explain two main advantages of this monetary policy strategy.
6-What is "inflation targeting"? Explain two main disadvantages of this monetary policy strategy.
7-Should central banks try to stop asset-bubbles? Provide one argument in favor and one argument against the central bank's intervention.
8-What is the Taylor rule?
9-The Federal Reserve decided not to put its monetary policy on autopilot by using a Taylor rule with fixed coefficient. Do you think it is a good idea? Explain.
Part 6 The Foreign Exchange Market
1-Why are exchange rates important?
2-Explain the theory of Purchasing Power Parity (PPP).
3-Provide two factors that affect exchange rates in the long run. Succinctly explain each one.