1. Why do financial crises occur and why are they so damaging to the economy? 2.

Question

1. Why do financial crises occur and why are they so damaging to the economy?

2. Suppose the Bank of Canada announces that it will raise the money supply in the future but

does not change the money supply today. Using the Fisher equation, explain what happens to the nominal

interest rate.

3. Critically explain why interest rates are pro-cyclical, using the supply and demand for bonds

framework.

4. Briefly explain the dynamics of the 2007 financial crisis in terms of adverse selection and moral

hazard.

5.  Explain, using the best framework you can think of (based on our class discussion), the effect

of a large federal deficit on interest rates.

Explanation / Answer

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

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