Questions from Financial Markets

Q: During the crisis of 2007–2008, the Federal Reserve created

During the crisis of 2007–2008, the Federal Reserve created an alphabet soup of emergency lending programs: TSLF, PDCF, AMLF, MMIFF, CPFF, and TALF, among others. Why did the Fed feel compelled to do...

Q: Explain why the Federal Reserve went from emergency lending to quantitative easing

Explain why the Federal Reserve went from emergency lending to quantitative easing.

Q: What is the Federal Reserve trying to twist in its “Operation

What is the Federal Reserve trying to twist in its “Operation Twist”?

Q: Irving Fisher explained the demand for money using the quantity theory of

Irving Fisher explained the demand for money using the quantity theory of money demand. Explain this concept to someone who has no training in economics.

Q: During the Reagan Administration in the 1980s, the US government ran

During the Reagan Administration in the 1980s, the US government ran large government budget deficits, which many argued would slow down the US economy. Using the loanable funds framework, explain in...

Q: Explain why targeting interest rates is so difficult for central banks if

Explain why targeting interest rates is so difficult for central banks if the demand for money is unstable.

Q: Fred is holding on to cash because he thinks interest rates will

Fred is holding on to cash because he thinks interest rates will increase in the future and thus bond prices will decrease, making the future a good time to buy bonds. Keynes would say Fred is holding...

Q: Explain why Keynes thought monetary policy during the Great Depression was like

Explain why Keynes thought monetary policy during the Great Depression was like “pushing on a string.” Was it similar during the Great Recession of 2008–2009? Why or why not?

Q: President Abraham Lincoln funded the Union Army during the Civil War by

President Abraham Lincoln funded the Union Army during the Civil War by a “monetization of public debt.” What did Lincoln do?

Q: Monetization of public debt often leads to which economic problem?

Monetization of public debt often leads to which economic problem?