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- When any central bank wanted to increase the money supply and loosen credit conditions, what would it do in the private market for government bonds? Explain how this is supposed to affect the economy.Briefly explain how banks can optimize their position through managing their use of currencies?How do you think the shape of the yield curve for commercial paper and other money market instruments compares to the yield cure for treasury securities? Explain your own interpretation. Many financial institutions borrow heavily in the money markets using mortgages and montages backed securities as collateral. How do you explain the impact of the credit crisis on deficit and surplus units that participate in the money market? Do you think that the money market should be regulated to ensure proper collateral in the money market? Can you explain how activities in the secondary T-bill market are conducted? How can this kind of activity benefit investors in T-bills? Why might a financial institution sometimes consider T-bills as a potential source of funds?
- Based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis?How can monetary policies created by a central bank affect financial markets and financial institutions? Instructions: Answer in 2 sentencesOne of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the government uses government purchases to stimulate the economy. a) Explain the crowding out effect in detail using a graph for the bond market, the money market, the foreign exchange market, and the AD SRAS LRAS model. b). Explain quantitative easing? c) If the Fed’s current policy is quantitative easing, do you think that there is a danger of the government’s current fiscal policy being crowded out? Why or Why not? Explanation required for credit.
- a. “A robust financial market is one of the pillars of stable economic growth and securedfinancial sustainability for the future.” Discuss. b. Why do managers of financial institutions care so much about the activities of the Central Bank?All else being equal, if a central bank buys government bonds from the market it would: a. mean savings in the economy are likely to increase. b. mean the supply of loanable funds would move to the left. c. increase the money supply. d. increase interest rates.“What are the pros and cons of regulating the financial markets and why are certain banks too big to fail?”
- 1. How has deregulation of the financial services industry affected the makeup offinancial intermediaries? How do you think intermediaries’ characteristics willchange in the future? 2. How do banking organizations in the United States differ from banking organizationsin other countries? Why are they different? 3. How is money created in a banking system that has fractional reserve requirements(i.e., a fractional reserve system)? 4. Describe the open market operations undertaken by the Federal Reserve. Whattype of trades would the Fed make if it wanted to increase interest rates? 5. How would funds—that is, the money supply—in the United States be affectedif the Federal Reserve increases reserve requirements? Give an example.Assume that the central bank primay goal is to correct a weak economy. How can it use open market operations to achieve its goal. What is a posible adverse effect of this action buy central bank(even if it achieves its goal)?.Treasury in banking is not just limited to holding and storing of cash rather its purview expands from commercial papers to derivatives. If this statement is correct, than clarify how treasury plays a vital role in banking operations and impacts the market and economy by and large. In case you feel that the statement is incorrect than describe the functions of treasury and how it plays a vital role in banking?