Reference no: EM132890220

Monetary Policy

Lagged Effects of Monetary Policy. Compare the recognition lag and the implementation lag.

Fed Response to Fiscal Policy. Explain why the Fed's monetary policy could be dependent on the fiscal policy that is implemented.

Passive Monetary Policy. Describe a passive monetary policy.

Fed Control. Why may the Fed have difficulty in controlling the economy in the manner desired? Be specific.

Impact of Money Supply Growth. Explain why an increase in the money supply can affect interest rates in different ways. Include the potential impact of the money supply on the supply of and the demand for loanable funds when answering this question.

Active Monetary Policy. Describe an active monetary policy.

Monetary Policy During the Credit Crisis. Describe the Fed's monetary policy response to the credit crisis.

Choice of Monetary Policy. When does the Fed use a loose-money policy and when does it use a tight-money policy? What is a criticism of a loose-money policy? What is the risk of using a monetary policy that is too tight?

Monitoring Money Supply. Why do financial market participants closely monitor money supply movements?

Tradeoffs of Monetary Policy. Describe the economic tradeoff faced by the Fed in achieving its economic goals.

Fed's Control of Inflation. Assume that the Fed's primary goal is to cure inflation. How can it use open market operations to achieve its goal? What is a possible adverse effect of this action by the Fed (even if it achieves its goal)?

Impact of Monetary Policy. How does the Fed's monetary policy affect economic conditions?

Economic Indicators. Stock market conditions serve as a leading economic indicator. Assuming the U.S. economy is currently in a recession, discuss the implications of this indicator. Why might this indicator possibly be inaccurate?

The Fed's Impact on the Housing Market. In some periods when home prices declined substantially, some homeowners blamed the Fed. In other periods when home prices increased, homeowners gave credit to the Fed. How can the Fed have such a large impact on home prices? Why would news that the general inflation level has increased substantially possibly affect the Fed's monetary policy and therefore affect home prices?

Monetary Policy during the War in Iraq. Consider the likely discussion that was occurring in the FOMC meetings during the war in Iraq in 2003. The U.S. economy was weak at that time. Do you think the FOMC should have proposed a loose- money policy or a tight-money policy once the war began? This war could have resulted in major damage to oil wells. Explain why this possible effect would receive much attention at the FOMC meetings. If this situation was perceived to be highly likely at the time of the meetings, explain how it may have complicated the decision about monetary policy at that time. Given the conditions stated in this question, would you have suggested that the Fed use a tight money policy, a loose money policy, or a stable money policy? Support your decision with logic, and acknowledge any adverse effects of your decision.

Impact of Foreign Policies. Why might a foreign government's policies be closely monitored by investors in other countries, even if the investors plan no investments in that country? Explain how monetary policy in one country can affect interest rates in other countries.