Chapter 1: Q.13 (page 66)
Why do managers of financial institutions care so much about the activities of the Federal Reserve System?
As financial reserve system monitors the entire banking system of the nation
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Go to the St. Louis Federal Reserve FRED database and find data on the M1 money supply (M1SL) and the 10-year treasury bond rate (GS10). Add the two series into a single graph by using the “Add Data Series” feature. Transform the M1 money supply variable into the M1 growth rate by adjusting the units for the M1 money supply to “Percent Change from Year Ago.”
a. In general, how have the growth rate of the M1 money supply and the 10-year treasury bond rate behaved during recessions and during expansionary periods since the year 2000?
b. In general, is there an obvious, stable relationship between money growth and the 10-year interest rate since the year 2000?
c. Compare the money growth rate and the 10-year interest rate for the most recent month available to the rates for January 2000. How do the rates compare?
Explain the link between well-performing financial markets and economic growth. Name one channel through which financial markets might affect economic growth and poverty
Can you date the latest financial crisis in the United States or in Europe? Are there reasons to think that these crises might have been related? Why?
According to Figure 8, in which years would you have chosen to visit the Grand Canyon in Arizona rather than the Tower of London?
What is the typical relationship among interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa corporate bonds?
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