ECN 300 Money and Banking-DQs

Part-A

1. How are Federal Reserve banks parts of the government? In what ways are they part of the private sector? What are the main activities of Federal Reserve banks? What do the governors of the Federal Reserve System do? Why is the chairman of the Board of Governors so powerful?

2. Who Serves on the Federal Open Market Committee (FOMC)? How does the vote rotate among the presidents of Federal Reserve banks? What is the FOMC directive, why is it so important?

3. What are the Federal Reserve's major assets and liabilities? What are the relative amounts of each? Explain how the Fed can increase the money supply by engaging in open-market operations. What role do banks play in this process?

4. What are the Fed's four major tools for affecting the money supply? Which tool is used most commonly? Describe the movement in the money multipliers for M1 and M2 over the past 40 years.

Part-B

1. Describe the major goals of the Fed and how well they have been achieved in the past 20 years.

2. Compare and contrast the output gap, the unemployment gap, and the inflations gap.

3. Why have rules for monetary policy based on money growth been unsuccessful in recent years?

4. Would it make sense for a central bank to try inflation targeting by using the Taylor rule? What problems might the central bank encounter in trying to do so?