Unemployment is a bad thing, and the government should make every effort to eliminate it." Do you agree or disagree? Explain your answer.

2. Which goals of the Bank of Jamaica frequently conflict?

3. What procedures can the Fed use to control the three-month Treasury bill rate? Why does control of this interest rate imply that the Fed will lose control of the money supply?

4. If the BOJ has an interest-rate target, why will an increase in the demand for reserves lead to a rise in the money supply?

5. Interest rates can be measured more accurately more quickly than the money supply. Hence an interest rate is preferred over the money supply as an intermediate target." Do you agree or disagree? Explain your answer.

6. What incentives arise for a central bank to fall into the time-inconsistency trap of pursuing overly expansionary monetary policy?

7. What are the advantages of monetary targeting as a strategy for the conduct of monetary policy?

8. "Because inflation targeting focuses on achieving the inflation target, it will lead to excessive output fluctuations." Is this statement true, false, or uncertain'? Explain your answer.

9. Consider a bank policy to maintain 12% of deposits asreserves. The bank currently has $10 million in deposits and holds $400,000 in excess reserves. What is the required reserve on a new deposit of $50,000?

For Problems 10 - 11, recall from introductory macroeconomics that the money multiplier = 1/(required reserve ratio) .

10. If the required reserve ratio is 10%, how much of a new $10,000 deposit can a bank lend? What is the potential impact on the money supply?

11. A bank currently holds $150,000 in excess reserves. If the current reserve requirement is 12.5%, how much could the money supply change? How could this happen?