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HW5A - ECON 1500Homework 5A Analytical monetary Issues The...

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ECON 1500—Homework 5A: Analytical monetary Issues The New York Times, “For the Fed, the Choices Get Harder” 1. Define quantitative easing. 2. Why is quantitative easing not stimulating the economy, according to the former president of the St. Louis Fed? 3. Some observers are worried that the current quantitative easing would produce inflation. What does this scenario assume banks would do? Bernanke, “Reflections on a Year in Crisis” 1. Why did the Fed provide an $85 billion loan to AIG? 2. The Fed’s policy response was to create new liquidity facilities. Mention 2 facilities created in September-October 2008. 3. Why was it necessary, in the Fed’s view, to support specific institutions such as Citibank and Bank of America? 4. What other actions did the Fed take to stem the crisis and its effects? 5. Describe a ‘historical, more familiar’ type of bank panic. 6. More generally, when is a panic possible? 7. What is likely to happen to the price of assets when financial panics develop?
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