4. the great depression, what happened? And, what was the FED\'s role? 5. The th

Question

4. the great depression, what happened? And, what was the FED's role?

5. The thrift and Bank failures of the late 1980's and early 1990's, why, how?

6. How does the money multiplier work?

7. How do FED buys and sells work?

8. what are the functions of the FED?

9. what are the functions of money?

10. Its october and unemployment has his 4.0% and the inflation rate has hit 5%. oh-my. graph and explain this situation. assuming an active approach, what would the administration do? what current factors might hinder this ficsal policy? what would the FED do? use all necessary graphs to explain the FED actions and planned results to bring this situation back to long term equilibrium.

Explanation / Answer

Answer 4 :

In the Great Depression, according to Keynes the private investment fell to very low level which led to reduction in overall aggregate demand. Also, monetarists stated that Fed reduced the money supply during this period, which led to the fall in the aggregate demand.

Answer 5:

Regulatory and economic environment was easing which led to unrestrained real estate lending . Economic downturn, collapse of real estate and energy prices all contributed to the crisis.

Answer 6:

The deposits by the savers in the bank are used by banks to lend it to the borrowers. these are used by borrowers for further transaction and they also deposit the borrowed money in the banks. Thus, total money supply will increase by a multiple of deposits.Money multiplier is reciprocal of the required reserve ratio.

Answer 7;

It is done through buying and selling if Treasury securities. Purchase of securities to increase money supply and selling of securities to reduce the money supply.

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