Federal Reserve Individual Assignment

Federal Reserve Individual Assignment

M5 Individual Assignment(s) Due: 11/7/21

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Written Assignment

Select any two (2) of the following questions to answer, then click on the Compose Written Assignment button below and follow the instructions you find there. As you develop your essay, remember to include not only text materials but also contemporary materials as well. These can come from various sources and can reflect domestic and/or global concerns.

1. Why was the Federal Reserve System set up with 12 regional banks rather than one central bank as in other countries? Why was it made an independent quasi-governmental body and not a direct part of the federal government?

2. Review the following Fed article: “Reflections on a Year of Crisis,” by Ben S. Bernanke, Federal Reserve Board of Governors, speech on August 21, 2009. Detail what you have learned, and how it relates to your text readings.

3. What would happen to the value of the deposit multiplier if the public wanted to hold part of any increase in demand deposits in the form of currency, and/or if the public transferred part of any increase in demand deposits into time and savings accounts? What are the implications for the Fed’s control over the money supply?

4. You often read in the newspapers that the Fed has just lowered the discount rate. Does this signal that the Fed is moving toward a more expansionary monetary policy? Why or why not?

5. Most open market operations are currently repurchased agreements. Define these agreements and show what they tell us about the likely volume of defensive open market operations relative to dynamic open market operations.

6. What is the expectations trap? If people thought that the central bank was likely to raise the inflation rate to 3 percent from 2 percent, how might that lead to an expectations trap?

7. In response to the Sub-Prime Mortgage and Financial Crisis, Ben Bernanke worked to expand the Federal Reserve’s Balance Sheet through a process called Credit Easing / also called Quantitative Easing What is Credit/Quantitative Easing, and how does it effectively create electronic money? How did the Fed invest/spend this money? Has this policy been successful?

8. Briefly explain the history and then the differences between QE1, QE2 & QE3.

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