Assignment:
Answer the followings questions:
Q 1. Review the debate concerning Fed independence.
Q 2. With a 10% required reserve ratio, fonn the balance sheet for Eagle Bank, given: 100 Bank building, 200 capital, 300 US 4% Bonds, 500 Demand deposits; 100 Bank borrowing; 450 Mortgages; 100 Retained earnings;200 Car loans; 300 Time deposits. How much can the bank lend? How will this lending change the money supply?
Q 3. With 300 currency, 1200 deposits, 240 excess reserves and 10% required reserves ratio, which event would have greatest impact on the money multiplier: a rise in the C/D ratio to .5 or a reduction in the required reserve ratio to 5%?
Q 4. What are Fed monetary policy tools? How effective and flexible are they?
Q 5. In the market for reserves, show and explain how an open market sale of securities by the Fed will affect the federal funds rates, the supply of reserves and the demand for reserves.
Q 6. Show and explain Fed actions to retain its inflation target when the economy experiences a large negative technological shock.
Q 7. Show and explain why the Fed can target non-borrowed reserves or the federal funds rate, but not both.
Q 8. What are the goals of monetary policy?
Q 9. Show and explain how a negative shift in the aggregate supply curve causes a policy dilemma for the Fed.
Q 10. Discuss the types of lags that affect activist aggregate demand policies to resolve unemployment and inflation problems caused by shocks.