Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. This questions is based on the article, Central banks should consider offering accounts to everyone, published by The Economist on May 26, 2018. The

1. This questions is based on the article, "Central banks should consider offering accounts to everyone," published by The Economist on May 26, 2018. The article examines the idea that people are allowed to open accounts at the central bank so that quantitative easing (QE)i.e. injecting large amounts of newly printed cash into the economycould be conducted directly through those accounts rather than indirectly via banks, as is the current practice. The article also argues that using electronic money for such accounts may enable the central bank to connect with the population and manage its monetary policies more directly, rather than going through the banking system, as is currently the case.

(a)According to the article, one consequence of individual central-bank accounts is that the central bank could gain more direct control of money supply. How does the banking system work right now, and who are the intermediaries between the central bank and the population? How may these intermediaries interfere with the monetary policies propagated by the central bank? And how would the proposed individual central-bank accounts impact monetary policy?

Answer:

(b)According to the article, a second consequence of individual central-bank accounts is that it enables the central bank to implement QE policies more effectively. Why is this the case and what are its potential benefits? What's the connection of the individual central-bank accounts idea to 'helicopter money' and the unique advantage of the central bank over commercial banks in its administration?

Answer:

(c)According to the article, individual central-bank accounts can change some of the political constraints on monetary policy, especially from the perspective of equity. Why is this the case and what are its potential benefits?

Answer:

(d)According to the article, individual central-bank accounts may also create more competition for deposit-taking banks. Why is this the case and what are its potential benefits?

Answer:

(e)According to the article, what are the potential pitfalls of individual central-bank accounts?

Answer:

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics Principles, Problems, And Policies

Authors: Campbell McConnell

21st Edition

1259915727, 9781259915727

More Books

Students also viewed these Economics questions

Question

What are the benefits to a business of issuing share warrants?

Answered: 1 week ago