For general information on using Federal Reserve Economic Data (FRED) online, visit U www.mhhe.com/moneyandbankingbe.com and refer to the FRED resources. 1 . In conducting monetary policy, the European Central Bank (ECB) must balance the needs of euro-area countries with differing economic conditions. Plot since 1990 the yield spread between government bonds in Italy (FRED code: INTGSBITM193N) and Germany (FRED code: INTGSBDEM193N), along with the yield spread between government bonds in Spain (FRED code: INTGSBESM193N) and Germany. Discuss the yield spreads after 2008, and explain how they reflect policy challenges for the ECB. (LO2) 2. How important is the balance sheet channel of monetary policy? Plot since 1996 the net tightening of credit standards for consumer and credit card loans (FRED code: DRTSCLCC) and (on the right scale) household net worth (FRED code: TNWBSHNO). Do banks adjust lending conditions when household balance sheets improve or deteriorate? (LOI) 3. Among the challenges facing central banks around the world is the elevated level of public debt. Plot U.S. federal debt held by the public as a percent of gross domestic product (FRED code: FYPUGDA188S), and discuss the problems that government debt could pose for the Federal Reserve in the future. (LO2) 4 * Some critics argue that the Federal Reserve stoked the housing price bubble after 2000 by keeping monetary policy too stimulative. To investigate, first plot from 2000 to 2007 on a quarterly basis the Taylor rule gap-the difference between the Taylor rule (as described in Chapter 18 Data Exploration Problem 1) and the federal funds rate. Add to this plot on the right scale an index of U.S. housing prices (FRED code: SPCS20RSA). Does the evidence support the critics' claim? What other evidence might be sought? (LO1) 5. Prior to the crisis, neither policymakers nor investors anticipated the impact of falling housing prices on the U.S. financial system. To see whether similar risks exist today, plot since 1990 U.S. real housing prices: namely, the Case-Shiller U.S. National Home Price index divided by the level of consumer prices (FRED code: CSUSHPISA and CPIAUCSL). Discuss the result and explain why housing matters so much for the financial system. (LO2) *Indicates more difficult problems