1. Review questions Chapter 7 section 1,Q1 and Q2 2. Suppose the prime role of college is to screen workers for future productivity. Give a policy change that would improve average welfare. Give a second one which reduce inequality. Repeat under the assumption that employers value college educations because of the skills prospective employees learned in school. 3. Review question Chapter 7 section 3,Q2 and Q3 (but explain how high deductibles work in Q3) 4. How would each of these affect the money supply? a. Banks decide to hold more excessive reserves (i.e. reserves beyond the legally required amount.) b. People withdraw cash from their bsnk accounts for Christmas shopping. c. The FedersI Reserve sells gold to the public. d. The Federal Reserve reduces the interest rates it pays on deposits of depositary institutions hold at the fed. e. A financial crisis leads people to sell many of their stocks and deposits the proceeds in bank accounts with are federally insured. f. The Federal government sells $20 billion of new government bonds to the Federal Reserve. The proceeds of the sale are used to pay government employees. g. The Federal Reserve sells some of its govt reserves for yen. 5. Explain how banks offer the benefits of diversification to depositors who may only have accounts at one bank. Is this related to how mutual funds achieve diversification? How would the presence of systematic risk affect your answer to either part of the is question? 6. Capital regulation for banks is often risk-weighted. Let's say the assets we are talking about are mortgages to a bank's customers. Let's say the bank has a preferred mortgage for which the bank offers the lowest interest rate. How should the bank's monitoring of these loans factor into the banking regulator's judgement of the risk of these assets. Should the bank be allowed to offer low interest rates to mortgages that the regulator does not judge as safe or as the component of a safe set of mortgage portfolios. What if the regulator relies on the bank to gather data? 7. Banks facing potential bank runs often declare delays on withdrawing deposits as a means of postponing a bank run. Suppose a bank has both insured and uninsured deposits. Should the FDIC allow banks to call temporary freezes on insured deposits? How about uninsured deposits. Suppose that FDIC approval is needed to call a temporary freeze on insured deposits., should the FDIC be able to mandate a freeze on uninsured deposits? 1. Review questions Chapter 7 section 1,Q1 and Q2 2. Suppose the prime role of college is to screen workers for future productivity. Give a policy change that would improve average welfare. Give a second one which reduce inequality. Repeat under the assumption that employers value college educations because of the skills prospective employees learned in school. 3. Review question Chapter 7 section 3,Q2 and Q3 (but explain how high deductibles work in Q3) 4. How would each of these affect the money supply? a. Banks decide to hold more excessive reserves (i.e. reserves beyond the legally required amount.) b. People withdraw cash from their bsnk accounts for Christmas shopping. c. The FedersI Reserve sells gold to the public. d. The Federal Reserve reduces the interest rates it pays on deposits of depositary institutions hold at the fed. e. A financial crisis leads people to sell many of their stocks and deposits the proceeds in bank accounts with are federally insured. f. The Federal government sells $20 billion of new government bonds to the Federal Reserve. The proceeds of the sale are used to pay government employees. g. The Federal Reserve sells some of its govt reserves for yen. 5. Explain how banks offer the benefits of diversification to depositors who may only have accounts at one bank. Is this related to how mutual funds achieve diversification? How would the presence of systematic risk affect your answer to either part of the is question? 6. Capital regulation for banks is often risk-weighted. Let's say the assets we are talking about are mortgages to a bank's customers. Let's say the bank has a preferred mortgage for which the bank offers the lowest interest rate. How should the bank's monitoring of these loans factor into the banking regulator's judgement of the risk of these assets. Should the bank be allowed to offer low interest rates to mortgages that the regulator does not judge as safe or as the component of a safe set of mortgage portfolios. What if the regulator relies on the bank to gather data? 7. Banks facing potential bank runs often declare delays on withdrawing deposits as a means of postponing a bank run. Suppose a bank has both insured and uninsured deposits. Should the FDIC allow banks to call temporary freezes on insured deposits? How about uninsured deposits. Suppose that FDIC approval is needed to call a temporary freeze on insured deposits., should the FDIC be able to mandate a freeze on uninsured deposits