Explain how the central banks are able to reduce the level of aggregate demand in an economy by changing the reserve requirements of commercial banks? (4)
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- Explain how the central banks are able to reduce the level of aggregate demand in an
economy by changing the reserve requirements of commercial banks? (4)
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- D4) explain the loss function of central banks and how monetary policy can be implemented to cope with financial crises.Why is it important for the central bank of a country to be independent? (i) The central bank needs to be free from political pressures. (ii) Research has shown that inflation tends to be lower where central banks have greater independence. (iii) The central bank needs to ensure that it has the freedom to set the federal funds rate at one fixed level. (iv) The central bank needs to ensure that the Federal Reserve governor never has to testify before Congress. (i) and (ii) (ii) and (iv) (ii) and (iii) O (i), (iii), and (iv)Is it preferable for central banks to primarily target inflation or unemployment? Why?
- Explain how the central banks are able to reduce the level of aggregate demand in an economy by changing the reserve requirements of commercial banks?Which of the following laws suggests that attempts by a central bank to regulate the level of lending by banks imposing certain controls can be circumvented by the banks searching alternatives out of the regulatory preview'? (a) Flag of Convenience Law (b) Swiss Syndrome Law (c) Goodhart's Law (d) Okun's Law128.) The Federal Reserve is considered a powerful institution because it has the power to: Act as a lender of last resort, control money supply in the long term, and print money. Create money, buy government bonds, and control long-term economic growth. Buy government bonds, act as a lender of last resort, and create money. Print money, tax, and control long-term growth
- 23) Which of the following legislation says the Federal Reserve should promote price stability and maximum employment, but does not specify how the Federal Reserve should weight these goals? the Clayton Antitrust Act of 1914 There is no such legislation affecting the Federal Reserve. the Federal Reserve Act of 1913 a 1977 amendment to the Federal Reserve Act.Banking began as a mostly private (non-government) industry and, over time, the government's role became primarily one of regulation (e.g., setting reserve requirements) and providing support for private banks (e.g., central banks lending banks money to pay deposits). Is this balance of responsibilities good? Should the government be less involved in banking, or should the government expand its role in banking by taking deposits from and making loans directly to individuals and businesses (like most banks do today).b) Explain the type of monetary policy used by central banks to overcome global recession.
- Discuss four (4) pitfalls of monetary policya) How do financial institutions benefit the overall economy? b) How do Fls reduce monitoring costs associated with the flow of funds from fund suppliers to fund investors? c) What is the Basel Agreement?Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy through direct government deficit spending or increased lending to businesses and consumers. For example, tax cuts and increased government spending. At the same time, expansionary monetary policy is when a central bank uses its tools to stimulate the economy. For instance, it increases the money supply, lowers interest rates, and increases demand. Only typed Answer