Assignment:
1. The Federal Reserve has signaled that they intend to increase interest rates three times during 2018. How will this affect the economy? Check out this video from The New York Times. What affect could the interest rate hike potentially have on unemployment? Why?
2. Take a look at the latest report from the Federal Open Market Committee (FOMC) According to this release, what is the Federal funds rate? How much did it change in the current period? Will this result in an increase in the money supply? A decrease? Or no change? How will this affect unemployment? How will this affect inflation?
3. The hit Broadway show Hamilton tells the true story of Alexander Hamilton's role in establishing the US monetary system and his conflicts with Thomas Jefferson. Hamilton envisioned a strong federal government and an economy based on industry. He proposed a central bank and an economy based on banking and industry. Jefferson proposed a small federal government and a decentralized agrarian based economy. Check out this summary from history.com
Of course, Hamilton's ideas prevailed. What if things had gone Jefferson's way? What if we had remained a decentralized agrarian based economy? What if there were no central bank? How would our economy be different with no central bank?
4. "Do not charge interest on the loans you make to a fellow Israelite, whether you loan money, or food, or anything else." - Deuteronomy 23:19
What if banks followed this scriptural mandate? If banks continued to make loans but did not charge interest, how would it affect changes in the money supply? How would it affect bank profit? What's the difference between the money supply and bank profits?
5. On Thursday, Aug 4, 2016 the Bank of England cut its interest rate to 0.25% -- the lowest it's ever been in the central bank's 332-year history. They also announced the government would buy government and corporate bonds (quantitative easing). Check out this article in The Guardian. This is all in response to changes in the economy since the UK voted to leave the European Union in June. What is the central bank trying to do - increase the money supply or decrease the money supply? Why? How would that help the economy? Will it work?
6. Zimbabwe has been facing 200 million percent inflation. A loaf of bread is a billion Zimbabwe dollars. As you might expect, the US dollar is in short supply there and people are hurting. It relates to sanctions imposed by the West in response to corruption at the highest level of government. On Nov, 21, 2017, Robert Mugabe, the president who ruled Zimbabwe for 37 years, was forced out of office by the military. (https://www.bbc.com/news/world-africa-42115622) If you were an advisor to the new president, Emmerson Mnangagwa, what monetary policy would you suggest to help stabilize Zimbabwe's economy? Given the huge inflation rate, should they increase the money supply or decrease the money supply? Why? And how would they do that?