The Federal Reserve System was designed as a decentralized central bank. Why?
Answer to relevant QuestionsWhen the Fed sells government bonds, the nation's money supply decreases. Explain how this works. To illustrate, you can construct your own bank transactions and changes in the assets and liabilities of the Fed and of banks. How does a bank's borrowing reserves on the federal funds market differ from borrowing from the Fed? "Unions make it difficult for government to reduce the rate of unemployment." Discuss the logic underscoring this view and show how it relates to the Phillips curve. Explain why each of the following is either a private good or a public good: traffic lights, in line skates, a city park, a chicken salad sandwich, a tennis racket, national defense, a coastal lighthouse. If the issue is equity, how can you justify a head tax on income, a proportional tax on income, and a progressive tax on income?
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