How to prevent the bad outcome in the first place

Assignment Help Microeconomics

Reference no: EM131833221

Question: The Fed plays an important role in maintaining market confidence. As former Chairman Alan Greenspan put it in a 1997 address: "In [financial crises] the Federal Reserve stands ready to provide liquidity, if necessary. The objectives of the central bank in crisis management are to prevent a contagious loss of confidence." [emphasis added] Just by standing ready to provide loans to banks in an emergency, the Fed can often prevent emergencies from happening in the first place. In each of the following examples, how does the fact that someone or something stands ready to cure the bad outcome help prevent the bad outcome from ever happening in the first place?

a. A security guard stands inside a bank.

b. Federal agents guard Fort Knox, where about one-half of the U.S. government's gold is stored.

c. The Federal Reserve promises to insure almost 100% of bank deposits.

d. Police, worried about possible riots during spring break in Palm Springs, California, bring in police from other cities.

Reference no: EM131833221

Questions Cloud

Reflect on how policies affect your direct service work : Reflect on how policies affect your direct service work with clients in your fieldwork placement or employment.

Review problem on financial bubble : When a financial bubble collapses, is that more like a fall in aggregate demand or a fall in the potential growth rate?

Discuss the different type of shock : Central banks and voters alike usually want higher real growth and lower inflation. What kind of shock makes that happen?

What are the variables and how are they measured : Identify potential internal and external validity issues in the conclusions drawn by the author(s).What are the variables and how are they measured?

How to prevent the bad outcome in the first place : The Fed plays an important role in maintaining market confidence. As former Chairman Alan Greenspan put it in a 1997 address.

Demonstrate the audit of the specific privileges : SDEV 350 Homework - Auditing Oracle DB Objects. Create test scenarios that will demonstrate the audit of the specific privileges is taking place

How does change the Fed response to economic shocks : If velocity does tend to move in the direction of money growth, how does this change the Fed's response to economic shocks: Should it take bigger moves.

Determining the effect of both inflation and real growth : We saw that real shocks and AD shocks often occur simultaneously. When this happens, unless we know the exact size of each shock.

What will the velocity shock do to real growth : One argument for giving discretion to central bankers is that sometimes emergencies come along that a simple rule can't solve.

User Account

All Pages