Part 1total 1 point if you complete all three questions.

Part 1:total : 1 point if you complete all three questions. Q1 ,2,3 and 4 has each 1 point, but Q5 has 6 points. 1) What kinds of Monetary policy(easy or tight) should be exercised under the recessionary gap? Give examples of policy tools in terms of RRR(Required Reserve Ratio), DR(Discount rate) and OMP(open market policy) (1 point). 2) Explain the’ MONEY MULTIPLIER’ of money creation including the formula and the process.(1 point)3) Compare discount rate, federal fund rate, prime(lending) rate and deposit rate.(1 point)4) Discuss the relationship between Bond price and interest rate. (1 point)5) Treasure Hunt: a) Go to (Links to an external site.)Links to an external site. web site. At Bookshelf of Arnold economics of 10th edition, click Economics Course Mate of Economics(11th ed) by Roger A Arnold . Then, click ‘select chapter’ for Ch 15 and try Ch15; Monetary Policy to get access to ‘Sample Quizzes’ under left menu bar. Describe #4 question and its correct answer with logical explanation. (3 points)b)After watching ‘ BBC video ‘ of Ch 12, and 13 at, (Links to an external site.)Links to an external site. analyze the contents of those videos by relating into economic theories. (3 points)for questions 5 ‘a’ and ‘b’ you need my login on name: f_konrath@hotmail.comPassword: 1504GremioPart 2: It seems big, but you need to choose 1 topic among the 8 bellow to write about.Your comment has to be more than five(5) sentences, based on researched facts and logical analysis to earn the credit.On December 16th, 2015, FED decided to raise first time the record low target rate of federal reserve fund from 1/4% to 1/2%. On December 14th, 2016, Fed decided to raise the second time the federal fund rate from 1/2% to 3/4%.On February 1st 2017, Fed decided to maintain the target rate of federal fund rate between 1/2% and 3/4 %. On March 15th, 2017, Fed decided to raise the federal fund rate from 3/4% to 1%.On May 3rd, 2017, Fed decided to maintain the federal fund rate to 1%.On June 14th, 2017, Fed decided to raise the federal fund rate from 1% to 1.25%. Fed agrees that economic recovery is still moderate, Also Fed feels that the job market is slowly strengthening and the long term inflation signs stabilized. But Fed also feel it is necessary to maintain such accommodating easy monetary policy including very low interest rate until the unemployment improves and inflation rate goes up to 2.0%.Fed decided that the size of the mortgage bond purchase as QE policy was winding down on October 2014 as the economy continues to improve.The future rate hike will be gradual, depending upon the upcoming economic indicators.1) What’s your opinion about the Fed policy decision by next FOMC meeting?2) Do you feel that this near zero interest is necessary one, or it is too late for the economy and may not work to save declining economy , due to liquidity trap? or can we be back in double dip recession due to too early exit strategy by the FED’s tight monetary policy?3) Are you concerned about the inflation come back due to such easy monetary policy with zero interest rate for a long time? if so, when is the best time for the Fed to tighten further its monetary policy as an exit or normalizing strategy? 4) Since the interest is near zero and Fed runs out of very valuable monetary policy tool, is any other option available for the FED to boost economy? Another QE(Quantitative easing of FED’s bond purchase) policy? Operation Twist(Buy long T-bond, but sell short T-bill) to keep the long term interest rate low?5) Will this low interest policy easy up the credit condition?6) Will the new president’s spending increase on infrastructure and defense as well as tax cut on corporate income tax and individual income tax be inflationary and speed up the interest hike?7) Is there any risk that tight Fed policy may put US economy back into another recession,if tight Fed policy is ahead of curve , although it is gradual tightening?Go to the Fed web site( and look at the recent ‘ press release’ by FOMC and analyze it.


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