1. Monetary Policy of Central Banks / Fed:

a. What specific actions can a central bank / the FED take to pursue a stimulative monetary policy? (no description is necessary). (1.00 point)

b. Based on a above, what is the desired/expected change in interest rates? In light of the trade-off theory, what may be the impacts? (1.50 points)

2.Explain briefly the most important provision of the Basel Accord.

3.Mention two specific cases of moral hazard problems in the banking industry that may occur due to regulation and government action.