Which of the following statements iscorrect?Central bank laws shouldalways stipulate whetherthe fiscal agency functionis performed against a feeor for free.In the absence of a clearrule in the central bank law,the Ministry of Finance andcentral bank maycontractually agree on costand fee recovery.In the absence of a clearrule in the central bank law,the fiscal agency functionis presumed to beperformed against a fee.In the absence of a clearrule in the central bank law,the fiscal agency functionis presumed to be a freeservice..

The objective of the question is to identify the correct statement regarding the fiscal agency…

Answered: Which of the following statements is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q1. a) Critically analyze and discuss the likely impact of tightening the monetary policy rate on Commercial banks and the general economy.
Which of the following statements is correct? Central bank laws should always stipulate whether the fiscal agency function is performed against a fee or for free. O In the absence of a clear rule in the central bank law, the Ministry of Finance and central bank may contractually agree on cost and fee recovery. In the absence of a clear rule in the central bank law, the fiscal agency function is presumed to be performed against a fee. In the absence of a clear rule in the central bank law, the fiscal agency function is presumed to be a free service..
Which of the following can be described accurately as “policy rates adjusted by the Fed?” (a) federal funds rate and interest on excess reserves; (b) discount rate and prime rate; (c) 31-day Treasury bill rate and the 30-year Treasury bond rate; (d) discount rate and 30-year mortgage interest rate
With a current inflation rate of 1.8%, Real GDP = $23,450, and Potential Real GDP = $22,900, what is the appropriate Federal Funds Rate According to the Fed?
For all questions assume the following starting point: The money supply (M) is composed of currency (C) held by the non-bank private sector (NBPS) and demand deposits (DD) held at banks. Banks are required to hold cash reserves (CR) equal to 10% of their demand deposit liabilities. The remainder of the bank’s DD liabilities is backed by loans (L). Initially, banks have 2000 in cash reserves and the NBPS holds 500 in currency. Currently, banks not hold excess reserves. a. What are the initial values for DD, L, and M? DD= $20,000 L= $18,000 M= $5,000 b. What happens to the values in part a, if the NBPS decides to hold an additional 200 in currency? DD = 20,000, L = 18,000, M = 20,700 c. What would happen to the values in part a if banks decided to hold 2.5% excess reserves? DD = 20,000, L = 17,500, M = 20,500 d. What happens to the values in part a if concerns about the economy's future caused both b and c to happen? DD = 20,000, L = 17,500, M = 20,700 Given the results in…
Discuss two monetary policies that could be implemented by the central bank which would have the same impact as the policy implemented below: Interest rates on credit cards would be lowered on starting from 10% to 17% of the current rates. More such declines in credit card interest rates for smaller firms and impacted persons have been proposed by institutions.
Fed target interest rate = real risk free interest rate + current actual inflation rate + 0.5 x (inflation gap) – 1.0 x (unemployment gap) The Taylor Rule is based on economists' widely held belief that central bankers are willing to tolerate modest positive rates of ( inflation, unemployment ) if doing so will help to generate ( low inflation, full employment ). To capture that preference, in the Taylor rule equation, the coefficient on the inflation gap is 0.5 while the coefficient on the unemployment gap is This reflects the fact that policymakers care ( less, more ) about the unemployment gap than they care about the inflation gap. That is, they are assumed to care two times ( less, more ) about the unemployment gap than the inflation gap. The Fed has ( an official, no official ) allegiance to this rule. They ( are, are not ) free to change interest rates however they deem appropriate.
Draw and properly label three graphs of money supply-money demand (in one graph), investment demand, and AD-AS (6%). Then, referring to the graphs in your explanation, use one of the three traditional monetary tools to explain how the monetary transmission mechanism works to close recessionary and also inflationary gaps. (9%)
Which of the following is a difference between "quantitative easing" and ordinary open-market operations? Multiple Choice O There is no difference between the two policy tools. Open-market operations are focused exclusively on U.S. government bonds; quantitative easing also includes the buying and selling of debt issued by government agencies and government-sponsored entities. Quantitative easing is done in order to lower interest rates; open-market operations are merely intended to increase bank reserves Open-market operations involve forward commitment, quantitative easing is intentionally vague to maintain flexibility
The text provides an illustration of Taylor interest rate rule first proposed in the early 1990s as an automatic way to conduct monetary policy. One version of this rule (for 1988 – 2008 data) is: Federal Funds Rate = 2.07 + 1.28 x (inflation rate) – 1.95 x (unemployment gap) For 2020, use an inflation rate of 2% and the unemployment gap is the difference between current unemployment (6.9%) and the natural rate of unemployment (UN) = 4.5%. (1) What is the current value of the Federal funds rate? (2) What does the Taylor Rule predict? (3) Is there a Phillips Curve relationship in the Taylor Rule? Explain by assuming a fixed federal funds interest rate of 5% and then double the rate of inflation (this is not a numerical calculation problem).
What regulations appear to allow a central bank's attempts to restrict the quantity of lending by banks by applying specific controls to be evaded by banks seeking alternatives outside of the regulatory preview?
Identify a newspaper article from Trinidad and Tobago that provides a situation in which a contractionary monetary policy was implemented by the central bank. Ensure that you provide a screenshot of the article in your submission. The screenshot should include the name of the publication, date of publication and name of the article.(i) Identify the contractionary monetary policy used in the article. (ii) Carefully explain, in as much detail as possible, how the chosen action from the article will impact the money market. (iii) Illustrate using the money market diagram, the overall impact of the chosen action from the article on the money market.

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