Course: ECO 110

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Unit 8 Assignment »

Unit 8 Assignment

Unit 8 Assignment

- Please go to the following website:

http://www.federalreserve.gov/releases/h6/current/default.htm
What is the current value of M1?  What is the current value of M2?
If the banks in the banking system want to create more money, what has to happen with the new reserves and bank loans in order to create new money and expand the money supply?
- Suppose the FED buys $8 billion dollars of US government bonds.

- When the banks hand over the bonds to the FED, how do their bank reserves change?
- What do they do with those new excess reserves?
- How does that change the money supply?

- After the 2008 – 2009 recession, the FED has used a policy of “quantitative expansion”.  Presuming that means an expansion of the money supply, what do you think they have done to the discount rate over the last four years?