After analysing monetary policy and the US money supply, what do you think will be the short and long term consequences of the US Budget Deficit used to finance the economic stimulus package as well as the current administration’s economic, social and political goals? Think in terms of the money supply, inflation, the business cycle, interest rates, and scarcity.
Archive for June, 2009
The Short and Long Term Consequences of the US Budget Deficit
Tuesday, June 16th, 2009The Federal Reserve and Monetary Policy
Tuesday, June 16th, 2009According to the Wall Street Journal, the current Fed’s Fund rate target is 0% – .25%, the discount rate target is .50%, the Feds opinion on current economic conditions is: “contraction is slowing”, estimates on unemployment stand between 9% -10%, CPI 0% – -1.3%, and GDP -5.7%.
If you were given the task of making recommendations to the Federal Reserve regarding monetary policy under the current economic conditions, what tools would you recommend and why? Feel free to use the money supply graphs to express your opinion. Also, think in terms of setting interest rates and bank reserves, and FOMC transactions.
GM’s Bankruptcy
Thursday, June 4th, 2009Looking at the current demand and supply curves for GM, what do you think GM must do to become economically sound again? Explain whether the supply curve needs to shift upwards to the left or downwards to the right and why. Also, explain what would happen to the quantity demanded for GM cars once GM accomplishes the necessary steps on the supply side. Think of how consumers and suppliers behave in terms of quantity at any given price, and what variables can shift the supply curve to meet or increase the quantity demanded by consumers at a given price level.
The Federal Budget Deficit!
Thursday, June 4th, 2009Yesterday, in his testimony to congress, Federal Reserve Chairman Ben Bernanke urged congress to rein in the Federal Budget. Why is Chairman Bernanke so concerned about the trend in the federal deficit? Click here to read the related article in the WSJ.
