Question

While the fed promotes secrecy by not releasing the minutes of the fomc meetings to congress or the public immediately, the ecb holds a press conference after each of its meetings. Discuss the pros and cons of each of these policies.

Answer 1

The Fed promotes secrecy by not releasing the minutes of the FOMC meetings to Congress or the public immediately. Discuss the pros and cons of this policy.The argument for not releasing the FOMC directives immediately is that it keeps Congress off the Fed’s back, thus enabling the Fed to pursue an independent monetary policy that is less subject to inflation and political business cycles. The argument for releasing the directive immediately is that it would make the Fed more accountable.Quantitative Problem 3- The Federal Reserve wants to increase the supply of reserves, so it purchases $1 million dollars worth of bonds from the public. Show the effect of this open market operation using T-accounts. Banking System Assets Liabilities Reserves +$1 million Checkable Deposits +$1 million Securities +$1 million Reserves +$1 millionQuantitative Problem 6- 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? The bank must retain $10,000 × 10%, or $1,000 of the new deposit. The remaining $9,000 can be lent to, for example, mortgage borrowers, commercial borrowers, etc. Since the reserve requirement is 10%, the potential money multiplier is 1/0.10 or 10. The $10,000 deposit can potentially increase the money supply by $100,000.