Chapter 16, Problem 16.27C

Summary Introduction

Case summary:

During the beginning of the year, 1923 Country GY borrowed money from their own people to finance the war. Congress formed the federal reserve system in the year 1913 for stabilizing the economy.

Open market activities are equivalent to the printing of new money. The banks only need to have 10 % of their cash on hand. The rest of the cash is loaned out. In early 2017, the stock market seemed to have grown healthily.

To explain: Why economically stressed countries find it difficult to borrow money from outside for the recovery of the economy.