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How independent is the Federal Reserve? Based on the experiences of the Fed in the U.S., as well as other central banks, do you believe that the Fed should be independent? Provide both pros and cons
Mishkin p. 413. "In what ways can the regional Federal Reserve banks influence the conduct of monetary policy?"
The U.S. banking system evolved in its particular manner due to the haphazard settling of the U.S. frontier and our desire to consolidate financial power.
Comment on the quote of Edward Lazear that “incentives are the essence of economics”. Make sure you show the connection between this statement and what we have been studying:
What is the liquidity effect of an increase in the money supply? The income effect? Price-level effect? Expected-inflation effect?
Suppose the tax rate for the marginal investor is 10%. If the interest rate paid on certificates of deposit is 5.25%, what must the interest rate on municipal bonds be in order for the marginal inve
Compare the classical and expanded AD-AS models on the following grounds: (1) full employment, (2) the importance of AD, (3) the efficacy of monetary policy, (4) the efficacy of fiscal policy, (5) t
“The most likely cause of the instability of the money demand function after 1973 is the rapid pace of financial innovation occurring after 1973”.
What are the components of the monetary base? What are the components of the money multipliers? Critically assess the control of the Fed over the money supply, with respect to the monetary base and
Discuss the reasons behind the decline in traditional banking and consolidation of the banking sector in the United States since the 1980s.
What is the relationship between interest rate risk and maturity? Is the real interest rate as defined by the Fisher equation an accurate measure of the effective cost of borrowing for U.S. individua
Describe what is meant by the terms structural unemployment, frictional unemployment, and seasonal unemployment.
Compute the expected return on these assets and their standard deviations. Comment on which of the two assets should be more valuable.
List the three main components of the Glass-Steagall Act of 1933 and explain why this act was passed.
Describe the bank's balance sheet using a t-account. Compute this bank's net worth ratio and its debt-to-equity ratio.
Conduct a duration analysis for the bank, and show what will happen to the net worth of the bank if interest rates rise by five percentage points. What actions could you take to reduce the bank's in
Calculate the growth rate of real wage per hour between 1992 and 2002 from the following table.
Assuming these two bonds are otherwise identical (same level of risk, etc.), at what tax rate would an investor be indifferent between purchasing one bond or the other? Suppose the tax rate is actua
a) Draw the graphs depicting the supply and demand for bonds and the supply and demand for loanable funds. b) Using both of these graphs, show what happens to prices and quantities in the bond and l
If the nominal interest rate is below this equilibrium rate (so that the money market is in disequilibrium) describe the forces that would move the money market into equilibrium.
Consider the Keynesian AD-AS model. Suppose that an economy in initial long run equilibrium is disturbed simultaneously by a decrease in government spending and the development of a new technology t
Suppose that currency in circulation is equal to $300 billion, the required reserve ratio is 10%, checkable deposits are $600 billion, and excess reserves are $60 billion. Calculate the money multip
a. Compute net worth ratio and debt-to-equity ratio. b. Assume the interest rate increases from 4% to 6%. According to Gap analysis, what will be the change in the bank’s profit due to the in
Describe how each of the following factors contributes to financial innovation: advances in technology, changes in regulation, increased competition, increased price volatility.