2. C entral bankers work to reduce the volatility of the economic and financial

Question

2.     Central bankers work to reduce the volatility of the economic and financial system by pursuing five specific objectives (other than price stability):  

a.     high employment and output stability

b.     economic growth

c.     stability of financial markets

d.     interest-rate stability

e.     stability in foreign exchange markets

Choose two (2) of these and give three reasons why it is a problem if these conditions are not met. (Be sure to discuss what are the costs of not meeting these conditions and explains who bears the costs.)

3.     Show and explain using carefully labeled graphs why the Federal Reserve cannot use money targets and interest-rate targets at the same time.

4.     Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?

5.     State and define the conventional tools of monetary policy available to the Federal Reserve.  Which is preferred and why?

Explanation / Answer

2. When looking at the characteristics of a healthy economic system it is hard to ignore high employment and output stability, and economic growth. Economic growth requires many things, one of which being a skilled workforce that can compete in an ever changing technological landscape. With an educated workforce comes competetive salaries and the formation of a middle class, the cornerstone of a healthy economy, high employment rates quickly following as a result. Without a skiled educated labor force, jobs will become more competitive, leading to lower empolyment rates forcing unstable output as companies are unable to fill the ranks of skilled laborers.

3.Increasing the money supply leads to a lowering of interest rates, so in order to raise interest rates one must reduce the money supply in order to increase the demand for loanable funds.

4. The New York Federal reserve system play a special role as a result of it being tasked with the buying and selling of outstanding US Treasury Securities. This is the only branch of the twelve in the Federal Reserve system to do so.

5)The Federal Reserve

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.