How important is the balance sheet channel of monetary policy? Plot since 1996 the net tightening of credit standards for consumer and credit card loans (FRED code: DRTSCLC) and (on the right scale) household net worth (FRED code: TNWBSHNO). Do banks adjust lending conditions when household balance sheets improve or deteriorate?
Answer to relevant QuestionsThe government is heavily involved in the financial system. Explain why.Why do you think the financial system has become more globally integrated over time? Can you think of any downside to this increased integration?Explain how money encourages specialization, and how specialization improves everyone’s standard of living.Could the dollar still function as the unit of account in a totally cashless society?Among the challenges facing central banks around the world is the elevated level of public debt. Plot U.S. federal debt held by the public as a percent of gross domestic product (FRED code: FYPUGDA188S) and discuss the ...
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