4. Why is it important to have a separation between Central Banks and the government? Is it overly cynical to imagine that politicians would use monetary policy to get elected or reelected? (Regrettably it is because politicians cannot be trusted to do the right thing with monetary policy and that they will use policy like low interest rate to make themselves popular and win elections.)

4. Why is it important to have a separation between Central Banks and the government? Is it overly cynical to imagine that politicians would use monetary policy to get elected or reelected? (Regrettably it is because politicians cannot be trusted to do the right thing with monetary policy and that they will use policy like low interest rate to make themselves popular and win elections.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

27.A household buys U.S. government bonds, and at the same time the Federal Reserve (Fed) also buys government bonds. From the standpoint of monetary theory, the key difference between the two transactions is that A: the Fed is putting money into circulation, whereas the household is not. B: the household makes the purchase on the open market. C: the bonds held by the Fed do not need to be repaid at maturity. D: the Fed is putting bonds into circulation, whereas the household is not. C: the Fed requires permission from Congress to make the purchase.
If the president of the central bank in this economy is convinced that there is no need for any monetary policy actions for the economy recover from the pandemic. If his/her opinion is followed, explain whether you think the president’s opinion is good for the citizens of this economy?
What are two examples of expansionary monetary policy? A. lowering the federal funds rate; selling bonds B. raising the federal funds rate; buying bonds C. raising the federal funds rate; selling bonds D. lowering the federal funds rate; buying bonds
a) In his “The General Theory of Employment, Interest and Money, 1936”, John Maynard Keynes stated that ‘When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.’ Do you agree with Keynes’ statement that market failure is inevitable in financial markets? Justify your answer with reference to economic theory and evidence.
3
a) Below is a monetary policy that could be implemented by the government. Please explain the following policy: Policy: The government will use the other policy, expansionary monetary policy for the small firms which can buy loans to reduce the discount rate due to which it will be possible from them to take more credit and invest it in their business.
QUESTION 5 Which of the following statements is correct? A. monetary policy was contractionary during the Great Recession and contractionary during the COVID Recession B. monetary policy was expansionary during the Great Recession and expansionary during the COVID Recession C. monetary policy was contractionary during the Great Recession and expansionary during the COVID Recession D. monetary policy was expansionary during the Great Recession and contractionary during the COVID Recession
3. A. Suppose a collapse in consumer spending lowers GDP below potential and causes deflation in the economy. With the monetary policy rule that follows the Taylor Principle (the typical one we assume in lecture) should the central bank increase GDP above potential GDP? Why? B. In order to increase GDP what must the central bank do to interest rates? Is it always possible to raise GDP by changing the nominal interest rate? Why or why not?
) What would monetary policy look like according to a 'policy mix'?
The Federal Reserve's Federal Open Market Committee engages in open market operations, which is Select one: a. attempting to alter the interest rate when banks borrow and lend from each other. b. changing the interest rate that banks pay when they borrow from the Fed. C. the buying and selling of government bonds to affect the money supply. d. adjusting the interest rate that the Fed pays on excess reserves.