Problem 5
Why might an expansionary fiscal policy and a contractionary monetary policy work aqainst each other?
Problem 5
What do all thrift institutions have in common?
Problem 7
Analyzing Causes and Effects If all members of the Board of Governors served 14-year terms, no president would appoint more than four members during two terms in office. However, many board members do not serve full terms, and vacancies occur on average more than once every two years. How does this situation affect a president's influence on the Board?
Problem 7
Analyzing Causes To curb inflation, why is it easier for the Fed to use monetary policy to raise interest rates than it is for Congress to implement contractionary fiscal policy?
Problem 7
What happens to interest rates if the Fed implements a contractionary monetary policy when Congress and the president cut taxes and increase government spending? What effect do you think this would have on the economy? Why?
Problem 7
Daniel is a high school senior living in California. He receives a check from his grandmother in Florida as a graduation gift. How is the Federal Reserve involved in transferring the money from Daniel's grandmother's bank account to his account? Illustrate your answer with a flow chart.
Problem 8
You've been planning your college finances and you know that you'll have to take a bank loan to cover tuition costs. You read that the Fed intends to raise the RRR from 10 percent to 20 percent. How will this change affect the money supply and your ability to borrow money for college tuition?
Problem 8
Drawing Conclusions The four rotating members on the Federal Open Market Committee are chosen from these groups: . Boston, Philadelphia, and Richmond . Cleveland and Chicago . Atlanta, St. Louis, and Dallas . Minneapolis, Kansas City, and San Francisco Why does the Fed mandate that one of the rotating members must come from each of these four groups?
Problem 9
Applying Economic Concepts In 2005 , the Fed set the discount rate for banks in good financial condition at 1 percent above the targeted FFR. a. Would these banks be more likely to borrow short-term funds from another bank or from the Fed? Why? b. How does this policy help keep the federal funds rate close to the target set by the Fed?
Problem 9
Many economists argue that the economy is better off when monetary policy is used most often to stabilize the economy, with fiscal policy being used primarily as a backup to bring the economy out of longer recessions. Do you agree or disagree with this assessment? Why or why not?
