Reference no: EM131348746
1. Briefly describe the usefulness and limitations of the monetary policy tools of the Federal Reserve System.
2. Identify and discuss two (of three) concepts of independence related to the Federal Reserve.
3. Briefly describe the evolution of the Federal Reserve System from its inception to the current era.
4. Explain what we would expect to happen to the money supply if the Federal Reserve sells $5.5 million worth of U. S. Government bonds while banks increase their discount loans by $3 million. Be as specific as possible in your answer given the information provided.
5. Evaluate both of the following statements.
a. "If banks increase their excess reserves, the monetary base will increase. If the monetary base increases, the money supply will increase. Therefore, an increase in excess reserves increases the money supply".
b. The most important factor accounting for changes in the money supply in the long run is changes in bank lending policies that affect the money multiplier.
6. Evaluate which of the following options would be your best investment based solely on the yield to maturity criterion.
Option #1: Purchase a $35,000 discount bond selling for $28,100 and maturing in 8 years.
Option #2: Purchase a $10,000 coupon bond with a 5.5% coupon rate selling for $9,300 and maturing in 8 years.
7. List the factors that that determine a bank's holdings of excess reserves. Explain how a change in each factor affects excess reserves, the money multiplier, and the money supply.
8. Discuss in detail the functions performed by financial intermediaries (i.e. why do they exist) and the problems they have to address.
9. Explain why the government regulates the financial system. Be sure to include a description of the problems that are addressed by regulation and how regulation reduces those problems.
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