Help with 6 questions
1. Would you be willing to give up your checkbook and instead use an electronic means of payment if it were made available? Why or why not? What is more liquid in our economy, M1 or M2 and which one is larger? Make sure to explain your answers.
2. The Fed Chairman announces in a press conference that he will fight the higher inflation rate with a new anti-inflation program. Predict what will happen to interest rates if the public believes him. Why are expectations so important to the role of interest rates?
3. If a bank is falling short of meeting its capital requirements by $1 million, what three things can it do to rectify the situation? Make sure in your answer to compare and contrast the three tools that it has available and defend the one that you would use and why.
4. The Fed promotes secrecy by not releasing the minutes of the FOMC meetings to Congress or the public immediately. Discuss the effects that this has on the markets. Does this lead the Fed to the notion that they are classified as secretive and independent? Make sure to defend your answer using appropriate economic terminology.
5. “Because the public can see whether a central bank hits its monetary targets almost immediately, whereas it takes time before the public can see whether an inflation target is achieved, monetary targeting makes central banks more accountable than inflation targeting does.” Do you agree or disagree with this statement? What are the benefits of a central bank announcing a specific target?
Does this lead to better expectations that are set in the market?
6. “If the public believes that the monetary authorities will pursue a discretionary policy, a cost-push inflation is more likely to develop.” Do you agree or disagree with this statement? Do you think workers expectations about inflation is important within markets?
Requirements: at least 250 words each question