Federal Reserve ended all measures designed to change interest rates and instead allowed rates to be determined by markets. What would the advantages and disadvantages of this be
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Suppose that the Federal Reserve ended all measures designed to change interest rates and instead allowed rates to be determined by markets. What would the advantages and disadvantages of this be?
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- Will real wages start rising? If they don’t, should the central banks be raising the interest rate? Explain why.During the 2008-2011 financial crisis, two members of Congress proposed reinstituting the military draft as a solution to high unemployment, citing the experience of World War II. Would this have been a viable policy option? Discuss.assume that the Federal Reserve decreases the supply of money to fight inflation. show the effect of this policy action on the market shown in the graph
- For each of the following statements, say whether they are True or False,and explain your answer carefully. c) If economic models cannot predict the next credit crunch then economics has simply failed.d) If the government imposes a binding minimum price in a market, then the consumer surplus in that market will increase.e) The existence of inferior goods contradicts the idea that more of a good is preferred to less.f) As firms (consumers) do not actually tend to model their optimal decisions as in the supply (demand) analysis typically presented in most basic textbooks, that type of analysis is useless.g) Pareto optimality means that nobody can be made better off, and thus true Pareto optimality can only be found when the wealth distribution ischaracterized by perfect equality.h) Lowest price guarantees can only be good for consumerswhich of the following is NOT correct with respect to the Efficient Market Hypothesis? If markets are semi-strong form efficient, then fundamental analysts would not be able to earn abnormally good returns, after considering the risk they assume Semi-strong form efficiency says that if a company announces a labor strike, the stock price very quickly adjusts downward Evidence suggests that markets are NOT strong form efficient, since insiders could make abnormally good returns trading on private information. However, that is illegal Semi-strong form efficiency says that when Stryker makes an earning announcement, the stock price quickly reflects the new information Weak form efficiency says that technical analysts who study charts of stock prices and volumes can regularly make abnormally good returns, after considering the risk the assumeIf the Fed lowers interest rates, that is an example of
- "Animal spirits"—optimism about and predictions for the current and future state of markets—can fuel increased spending on things like homes and financial instruments, even when those "spirits" are not based on concrete information. If the Federal Reserve or other government entities feel that increased spending on real estate isn't merited by actual economic conditions and is leading to an asset price bubble, in your opinion, should they intervene? It depends on how certain the government is that a price bubble exists or will exist. No. The government should not tell people how to spend their money. It depends. If the information is exclusive to the government, it should share it. But if the information is publicly available, the government should stay hands-off. Yes. The government has an obligation to step in whenever it can assist with things like price bubbles.If the Federal Reserve wants to set an interest rate that best promotes economic growth and new jobs, what factors should they consider?Based on the impact of a drop in the discount rate on the supply of money in the market. select an economic problem where that impact would work and explain what happens.
- The following are agents or players in the economy EXCEPT, government banks producers labors The following are agents or players in the economy EXCEPT, government banks producers labors The following are agents or players in the economy EXCEPT, government banks producers laborsWhat evidence have you discovered that points to the Classical, Keynesian, and Monetarist theories being debated today?I have tried this problem before but I got the second half wrong, How do I shift the graph correctly? Now, suppose that Mexico experiences a sudden bout of political turmoil, which causes world financial markets to become uneasy. Because people now view Mexico as unstable, they decide to pull some of their assets out of Mexico and put them into more stable economies. This unexpected shock to the demand for assets in Mexico is known as capital flight. Shift the NCO curve to illustrate the effect of capital flight. Then, on the graph representing the market for loanable funds, shift the demand curve, the supply curve, or both to reflect the change caused by the shift in NCO. Determine the equilibrium interest rate after capital flight occurs, and enter it into the second row of the table. Then determine the level of NCO that occurs along the new NCO curve at the new equilibrium interest rate.