Question

1-Discuss the pros and cons of central banks for political process.

2-Discuss the stages of a financial crisis and define them, discuss crisis of 2007-2009 include the main remedies and steps the government/ central banks used to fix it

3-Discribe the major reason for increase in average size and decrease in number of banks in the US over the last 30 years. will this continue and why?

Answer 1

Ans:Fred has a pivot role in the economy.through its politics,the fed can stimulate or depress the economy stock markets,households,business,all are affected by major economic variables which are themselves influenced by the fed's monetary policy.The president can also take actions that will generate similar effects,but he needs the approval of congress,in contrast, the structure of the fed gives the chair substantial control over monetary policy.i.e the fed chair has a decisive and critical role in the economy.

When the federal reserve increases the money supply .it usually does so by purchasing treasury bills.this action does not result in increasing the income of house hold and firms through a direct channel.releasing dollars in the market does not increase.

It is true that the economy has no central bank before 1913.but then it should be remembered that the economy had experienced a dwindling economy with a week banking system and no stabilize monetary system.hence,there were small,yet radical oscillations from expansions and recession. fec was created to this end,to stabilize the economy and to provide a monetary guidance.