Question
For each statement below answer true or false, If your answer is false, briefly explain why it is false. a. Federal Reserve independence is thought
- For each statement below answer true or false, If your answer is false, briefly explain why it is false.
a. Federal Reserve independence is thought to introduce a short-term bias in policy making.
b. The fact that fifty years ago, the U.S. had a larger number of banks per capita than other countries at a similar level of economic development was an indication of vigorous competition within the U.S. banking industry.
c. Today (2021) regulators maintain the separation between banks and investment banks through the Glass-Steagall Act.
d. When a central bank acts as a lender of last resort, it tends to lessen the severity of the moral hazard problem.
e. In its role as a lender of last resort, the Fed should lend to banks that are solvent and illiquid.
f. The interest rate on overnight loans between banks is called the repurchase rate.
g. The interest rate decisions made by the Fed can be overridden bythe President
h. Members of the Board of Governors are appointed by the President, subject to confirmation by the Senate
2 In 1989, New Zealand became the first country to adopt an inflation target.
a. Plot the inflation rate based on New Zealand's "core" consumer price index (FRED code: CPGRLE01NZQ659N) beginning in 1970.
b. Compute the average inflation rate for the period through 1989.
c. Compute the average inflation rate for the period from 1990 to the present.
d. How did this policy regime change in 1989 affect the average rate of inflation and the
variability of the inflation rate.?
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