Week Three Discussion Questions
· What are the uses of money? How do commercial banks and Federal banks create money? Is monetary policy conducted independently in the United States? Explain your answer. Is it important for monetary policy to remain independent from all parties? Why or why not?
· What is the difference between contractionary and expansionary monetary policy? What is the intention of each policy under a depression, recession, or robust economy? Which type of monetary policy is more appropriate today and why?
· What happens to the money supply, interest rates, and the economy if the Federal Reserve is a net seller of government bonds? What happens to the money supply, interest rates, and the economy if the Federal Reserve is a net buyer of government bonds. Why would the government implement a stimulus program into the economy?
· Rank the factors that contribute to the discount interest rate from most important to least important. Justify your rankings.
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