Unit 2 Assignment 1

Assignment 1 (APA Format)

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Chapter 4

6. Reserve Requirements How is money supply growth affected by an increase in the reserve requirement ratio?

8. FOMC Economic Presentations What is the purpose of economic presentations during an FOMC meeting?

9. Open Market Operations Explain how the Fed can use open market operations to reduce the money supply.

Chapter 5

8. Fed’s Control of Inflation Assume that the Fed’s primary goal is to reduce inflation. How can it use open market operations to achieve this goal? What is a possible adverse effect of such action by the Fed (even if it achieves the goal)?

18. Economic Indicators Stock market conditions serve as a leading economic indicator. If the U.S. economy is in a recession, what are the implications of this indicator? Why might this indicator be inaccurate?

20. Impact of Inflation Targeting by the Fed Assume that the Fed adopts an inflation targeting strategy. Describe how the Fed’s monetary policy would be affected by an abrupt 15 percent rise in oil prices in response to an oil shortage. Do you think an inflation targeting strategy would be more or less effective in this situation than a strategy of balancing inflation concerns with unemployment concerns? Explain.