Assignment:
Part 1
We noticed that the 2007-2009 financial crisis raised a series of important questions about the financial system. Following the financial crisis, Congress debated the issue of reducing the independence of the Federal Reserve System. Should Congress and the president be given greater authority over the Federal Reserve System? Why or why not? Explain your reasoning in detail.
This should be a minimum of 300 words
Part 2
The Federal Reserve specifies a percentage of checkable deposits that banks hold must hold as reserves (required reserves), which is called the required reserve ratio. Excess reserves are reserves that banks hold over and above the required reserves and can make loans. Suppose that Bank A has an increase in checkable deposits of $100 million and the required reserve is 10%. How much money can Bank A create by making loans? How much money can the banking system as a whole create? Show your detailed calculation. What can you say about the relationship between the required reserve ratio and money creation? Why do some banks hold a part in excess reserves instead of loaning all excess reserves out? What are some other ways that banks may use a portion of their excess reserves?
This should be a minimum of 300 words