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The stability of leverage ratios is heavily dependent on the stability of the economy
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- Define “financial frictions” in your own termsApart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity-influence interest rates. Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false: Statements Countries with strong balance sheets and declining budget deficits tend to have lower interest rates. When the economy is weakening, the Fed is likely to increase short-term interest rates. During the credit crisis of 2008, investors around the world were fearful about the collapse of real estate markets, shaky stock markets, and illiquidity of several securities in the United States and several other nations. The demand for US Treasury bonds increased, which led to a rise in their price and a decline in their yields. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in…Targeting the federal funds rate ( is, is not ) as important a tool today as it was before the 2007-2009 financial crisis. During the financial crisis when the federal funds rate was near zero, the Fed ( did, did not ) wish to go lower than zero and came up with alternatives to influence interest rates and lending: the administered rates. Today, the Fed still sets a target for the federal funds rate but finds it more effective to change the administered rates. By doing that, the Fed can stimulate or restrict lending. The federal funds rate is the Feds policy rate and (is, is not ) useful when providing forward guidance. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- Graphically portray the Keynesian transmission mechanism under the following conditions: a. A decrease in the money supply b. No liquidity trap c. Downward-sloping investment demandIs either helicopter money or quantitative easing preferred in times of severe recessions in order to boost economic activity? Explain your reasoning.Suppose that Felix, an economist from a consulting firm, and Janet, another economist from an investigative reporting group, are both guests on a popular science podcast. The host of the podcast is facilitating their debate over government bailouts. The following dialogue represents a portion of the transcript of their discussion: Janet: Thanks to recent financial crises, the concept of bailouts is a hot topic for debate among everyone these days. Felix: Indeed, it's gotten crazy! A government bailout of severely distressed financial firms is unnecessary because free markets will properly price assets. Janet: I don't know about that. Without a bailout of severely distressed financial firms, the economy will experience a deep recession. The disagreement between these economists is most likely due to Despite their differences, with which proposition are two economis Immigrants receive more in government benefits than th differences in values differences in scientific judgments…
- c) Describe the Vickrey-Clarke-Groves (VCG) Mechanism, provide examples and discuss problems with the VCG mechanismWhat might the yield curve indicate about the market’s predictions about the inflation rate in the future?Which of the following is an example of a contractionary policy? A) Raising reserve ratio B) Raising taxes C) Raising discount rate D) All of the above
- if the federal government wants to stimulate a stagnating economy in a recession (increase production), which of the following actions would it take? increase the discount ratio, increase the reserve ratio, sell bonds to the public or none of the answers?Changes in the discount rate are more important than open-market operations in implementing monetary policy. 1) True 2) FalseWhat are the advantages and disadvantages of quantitative easing as an alternative to conventional monetary policy when short-term interest rates are at the zero lower-bound?