• GottotheFederalReserveBankofSt,Louiswebsiteathttp://www.stlouisfed.org.ClickontheresearchandDatatab,followedbytheFREDEconomicDatatab,andfindinterestratesonU.S.Treasurysecuritiesandoncorporatebondswithdifferentbondsratings.
• 1.Prepareayieldcurveortermsstructureofinterestrates.
• 2.Identifyexistingdefaultriskpremiumsbetweenlong-termTreasurybondsandcorporatebonds.

As an economist for a major bank, you are asked to explain a substantial increase in the price level when neither the money supply nor the velocity of money has increased. How can this occur?As an advisor of the U.S. Treasury, you have been asked to comment on a proposal for easing the burden of interest on the national debt. This proposal calls for the elimination of federal taxes on interest received from Treasury debt obligations. Comment on the proposal.As one of several advisors to the secretary of the U.S. Treasury, you have been asked to submit a memo in connection with the average maturity of the obligations of the federal government. The basic premise is that the average maturity is far too short. As a result, issues of debt are coming due with great frequency and need constant reissue. On the other hand, the economy shows signs of weakness. It is considered unwise to issue long-term obligations and absorb investment funds that might otherwise be invested in employment producing construction and other private-sector support. Based on these conditions, what course of action do you recommend to the secretary of the U.S. Treasury?Assume a condition in which the economy is strong, with relatively high employment. For one reason or another, the money supply is increasing at a high rate, with little evidence of money creation slowing down. Assuming the money supply continues to increase, describe the evolving effect on price levels.Assume you are employed as an investment advisor. You are working with a retired individual who depends on her income from her investments to meet her day-to-day expenditure. She would like to find a way of increasing the current income from her investments. A new high-yield bonds (junk bond) issue has come to your attention. If you sell these high-yield bonds to a client, you will earn a higher than-average fee. You wonder whether this would be a win-win investment for your retired client, who is seeking higher current income, and for you, who would benefit in terms of increased fees. What would you do?

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