Assignment: Money Supply Expansion
Topic 1:
The Fed can influence economic environment by regulating the money supply and interest rate. Discuss the main instruments that the Fed uses to achieve this. In your discussion give examples of how the Fed would address, a) inflationary gap, b) recessionary gap.
Topic 2
Critics of federal banking policy argue that deposits insurance is a key for banking failures. The banks enjoy a "heads I win, tails the government loses" proposition. Several possible reforms of deposit insurance have been suggested. For example, the limit on insured deposits can be increased, decreased, or eliminated. Do you think a change in deposit insurance would prevent bank failures? Discuss.