Problem 1: Explain the three major instruments of monetary policy and the effect on short run vs. long run output in an economy.
Problem 2: How does the Federal Reserve Bank control the quantity of credit?
Problem 3: Explain how the Fed through its policies and tools, affects overall prices, output, employment, and interest rates?
Problem 4: Prepare a Federal Reserve Bank balance sheet using the following data:
1) $100 Billion of Federal reserve Notes
2) $42 Billion of deposits including Member bank Federal Reserve Notes
3) $12 billion of Gold certificates
4) $110 Billion of U.S. Government securities
5) $5 billion of discount, loans, and acceptances
6) $10 Billion of miscellaneous debts
7) $28 billion of other assets
8) $?? Capital accounts
When the Federal Reserve Banks buy $10 million of government bonds from the public, explain the initial impact on the balance sheets of the Federal Reserve Banks and the Commercial banks.