Plot on a weekly basis the ratio of currency (FRED code: CURRENCY) to checkable deposits (FRED code: TCD) from the start of 2000 through 2002. Download the data and identify the week of the downward spike in the graph. Do you think the spike reflects the currency term in the numerator or the deposits term in the denominator? Explain your reasoning.
Answer to relevant QuestionsIn the Great Depression, the Fed allowed the money supply to decline. To confirm that the Federal Reserve learned from this lesson, plot since 2000 the M2 multiplier – the ratio of M2 (FRED code: M2SL) to the monetary base ...Suppose the Federal Reserve did not pay interest on excess reserves. How would the reserve demand curve differ from that in Figure? Use the following Taylor rule to calculate what would happen to the real interest rate if actual and expected inflation increased by 3 percentage points. Target federal funds rate = 2 + current inflation + ½(inflation gap) ...The central bank of a country facing economic and financial market difficulties asks for your advice. The bank hit the zero bound with its policy interest rate but it wasn’t enough to stabilize the economy. Drawing on the ...Explain the mechanics of a speculative attack on the currency of a country with a fixed exchange-rate regime.
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