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Directions: Please answer each of the following questions in as detailed a manner as possible, and be sure to include all appropriate material discussed in the lectures and the assigned reading material.
1) Compare and contrast the way Classical and Keynesian theory determine the Demand for Money and how it is related to the Money Supply. As a part of your comparison, indicate which of these theories developed the concept of a Liquidity Trap and what this does to the Demand for Money as part of that theory.
2) Explain the ways in which Fiscal Policy and Monetary Policy interact by using Keynesian IS and LM curves. Discuss the impact of an expansionary Fiscal Policy and Monetary Policy on the overall level of economic activity. Include the conditions in which Monetary Policy would have a greater influence on GDP growth and the conditions in which Fiscal Policy would have a greater influence on GDP growth.
3) Name and discuss the major types of financial intermediaries in the U.S. and illustrate the differences in the way assets and liabilities are recorded on their balance sheets. Describe the major differences between depository and nondepository intermediaries, which institutions have recently handled the majority of financial transactions and the major factors that have caused this shift over the past several decades.
4) Discuss the role of the FOMC and the three major policies it implements to help regulate banks. Briefly describe the equation used to measure bank reserves and the definition of the federal funds rate and their role as operating targets of the Federal Reserve as part of the FOMC directive.
Define what a teaming agreement is and support your answer with an example. Compare and contrast the pros and cons of a teaming agreement.
What's the difference in the effective annual rates charged by the two banks?
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Analyze the effect of each of the following events on the market for loanable funds in a closed economy in long run equilibrium. In each case, identify the effect on national saving and its components, the level of investment, and the real interest r..
Imagine an island economy that is periodically struck by an epidemic disease that affects only children. From past experience the islanders found that the disease strikes randomly, affecting 80% of all children. What is the (laissez faire) market sol..
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The expected cost of doing it then is $68,000. What is the implied interest rate for postponing the bike path?
What are the 2 major elements of fisical policy, and briefly explain how fiscal policy is used to help manage the business cycle?
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Over the past several years, the predictions of the Philips Curve haven’t exactly panned out. Now, with the expectation of meaningful expansionary fiscal policy on our horizon, and starting from near full employment, the predictions of the Philips Cu..
Consider the case of a monopsonist who is the only... Consider the case of a monopsonist who is the only employer in an isolated town in West Virginia. There are 100 individuals who live in the town, and each has a utility function given by u(l,c) = ..
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