Feds put $23.5 trillion back into the market which Went back into the rising bill stock market. However, it was not enough to create stability. What other financial assets did the Fed buy in order to stabilize the market?
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- Feds put $23.5 trillion back into the market, which Went back into the rising bill stock market. However, it was not enough to create stability. What other financial assets did the Fed buy in order to stabilize the market? What did Fed by using quantitive easing 1, 2, and 3? How much did it cost? And how did it affect the market?Suppose a given country experienced low and stableinflation rates for quite some time, but then inflation picked up and over the past decade had beenrelatively high and quite unpredictable. Explain howthis new inflationary environment would affect thedemand for money according to portfolio theories ofmoney demand. What would happen if the governmentdecided to issue inflation-protected securities?How do the monetary policy tools of the European System of Central Banks compare to the monetary policytools of the Fed? Does the ECB have a discount lendingfacility? Does the ECB pay banks an interest rate ontheir deposits?
- “Since financial crises can impart severe damage to theeconomy, a central bank’s primary goal should be toensure stability in financial markets.” Is this statementtrue, false, or uncertain? Explain.The Federal Reserve has raised the Federal Funds rate by 3.75 percent within the past year. Ifa bank had capital of 10 percent when the Fed began raising rates and has no loans at risk ofdefault, under what circumstances will its capital position be compromised? Please be specific.The central bank of Trinidad and Tobago decides to pursue acontractionary monetary policy. Provide a table with the money supply data and inflationrate for Trinidad and Tobago for 2014 - 2019.Based on the data from Trinidad, do you agree with thecentral bank’s decision to pursue a contractionary monetary policy? Explain why orwhy not.
- Assume that the reserve requirement is 5 percent. All other things beingequal, will the money supply expand more if the Fed buys $2,000 worthof bonds or if someone deposits in a bank $2,000 that she had beenhiding in her cookie jar? If one creates more, how much more does itcreate? Support your thinking.Since the end of the Great Recession of 2008, interest rates have been at historic lows—in some cases, close to zero. How is expansionary monetary policy, or more specifically a open market purchase, supposed to work and How do near-zero interest rates limit the ability of expansionary monetary policy to work? how effective has the Fed’s policy been as a response to the Great Recession of 2008 and more recently the Covid 19 Recession? short answer ( paragraph ) supported by evidenceOnly answer part D.B. If the central bank’s goal is to maximize output, what interest rate will we expect in equilibrium?C. Starting from the equilibrium described in (B), suppose investors experience a decrease in “animal spirits.” What happens to output? Can the central bank offset this with expansionary monetary policy?D. What could fiscal authorities do to offset the shock to animal spirits described in (C)?
- The demand curve and supply curve for one-year discount bonds with a face value of $1,050 are representedby the following equations:Bd: Price = -0.8 * Quantity + 1160Bs: Price = Quantity + 720Suppose that, as a result of monetary policy actions, theFederal Reserve sells 90 bonds that it holds. Assume thatbond demand and money demand are held constant.a. How does the Federal Reserve policy affect the bondsupply equation?b. Calculate the effect on the equilibrium interest rate in this market, as a result of the FederalReserve action.An important way in which the Federal Reservedecreases the money supply is by selling bonds to thepublic. Using a supply and demand analysis for bonds,show what effect this action has on interest rates. Isyour answer consistent with what you would expect tofind with the liquidity preference framework?How does high inflation lead to a recession in the country? Explain the role ofthe Government and the Central Bank to address the economic recessionproblem by using appropriate fiscal and monetary policies. Are there anypotential problems with such policies?( Answer in 1000 words)