Question
a. The early 80s had a very severe recession (technically two back-to-back recessions across 1980 to 1982) that Fed Chair Paul Volcker is partially credited
a. The early 80s had a very severe recession (technically two back-to-back recessions across 1980 to 1982) that Fed Chair Paul Volcker is partially credited with causing. Explain how AND why a Fed Chair caused the highest unemployment rate the US had between the Great Depression and the Covid recession.
b. economist Lars Christiansen wrote:
The general perception is that global bond yields are historically low because monetary policy has been aggressively eased... But there's a strong case to be made that this perception is wrong.
...there has been a significant re-regulation of global financial markets... Among other things, its provisions require banks and other financial institutions to hold safer assets -- including highly-rated government debt...
Finally, and perhaps most importantly, demographic trends are having a very significant impact on savings and risk appetite, and those affect bond yields. [an older society will substitute away from stocks towards bonds]
Explain Christiansen's argument graphically in words. That is, explain what kind of shock (supply or demand/positive or negative) regulation and an aging society has. What will the final price be of bonds relative to before these shocks?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started