Regulation, The FED, and Monetary Policy and Reserves

PART 1:  REGULATION

 

General Questions:

Using Microsoft Word, respond to the following questions thoroughly, in 150-300 words for each question.  Use your textbook, Financial Markets and Institutions by Frederic S. Mishkin and Stanley G. Eakins Eighth Edition, as your first and major reference. Be sure to explain your answers thoroughly, use specific examples, use in-text citations and full reference and cite your sources. Also, be sure this is in APA format.

 

  1. Why are financial markets so heavily regulated?  Is this level of regulation fair or needed, given the level of regulation in other industries?
  2. In most countries there is one central bank that serves the entire nation.  In the United States, there are 12 regional banks that serve the nation.  Why was this structure adopted in the United States?
  3. Is the Fed a true independent entity?  Does Congress or the President have any control over the actions of the Fed?

 

PART 2:  THE FED

 

Go to the Federal Reserve System Web site.  Use the information on this site and in your textbook, Financial Markets and Institutions by Frederic S. Mishkin and Stanley G. Eakins Eighth Edition, when addressing the following questions:

 

  1. What are the basic duties of the Fed?
  2. What is the basic structure of the Fed?
  3. What is the FOMC?  What is the membership of the FOMC?  What are the responsibilities or duties of the FOMC?
  4. What are the roles of the regional Fed banks?  Why is the New York Fed bank so important?
  5. Who are the member banks?  What is their role? What are the benefits/costs associated with membership in the Federal Reserve System?

Required:

Using Microsoft Word, write a 3-6 page essay that addresses the above-noted questions, using APA format with in-text citations and full reference.  Also, needs to be plagiarism free.

 

 

PART 3:  MONETARY POLICY AND RESERVES

 

You are analyzing the financials for the Marysville National Bank (MNB), and know that the Fed has imposed a 10% reserve requirement. Using this abbreviated balance sheet, answer the questions listed below.

Maryville National Bank (MNB)

Balance Sheet

Assets

Liabilities

Loans

$90,000

Demand Deposits

$140,000

Cash

30,000

 

 

Reserves

20,000

 

 

 

Required:

  1. What are excess reserves?  What are required reserves? Does MNB have any excess reserves?  If so, how much?
  2. Can MNB make any additional loans?  If so, how much?
  3. If MNB makes all the new loans it can, what would the new balance sheet look like?
  4. If all the possible loans are made, would the money supply change?  If so, by how much? Explain how the money supply might change initially, and then over time.
  5. Assume now that the Fed imposes a more restrictive monetary policy by increasing the reserve requirement to 20%.  Using the initial balance sheet above, answer questions 1-4 again.  Show what the revised balance sheet would look like and describe all changes that will occur as a result of the change in reserve requirement.

Deliverables:

  1. For Part 1 and Part 2, use a Microsoft Word document in APA format with in-text citations and full reference.  Also, use the textbook, Financial Markets and Institutions by Frederic S. Mishkin and Stanley G. Eakins Eighth Edition, as a reference
  2. For Part 3, use a Microsoft Excel spreadsheet.  Show all your calculations and conclusions.
  3. All parts must be plagiarism free.

Grading Criteria for Part 2 and Part 3 listed below:

 

Assignment 2 Grading Criteria

Maximum Points

Identified the basic structure and duties of the Fed.

5

Correctly described the FOMC, its membership, and its responsibilities or duties.

5

Identified the roles of the regional Fed banks, and explained why the New York Fed bank is so important.

5

Correctly identified the member banks and described their role. Described the benefits and costs associated with membership in the Fed.

5

Correctly described the different types of reserves. Performed calculations to determine whether or not MNB has excess reserves, and correctly identified an amount if MNB has excess reserves.

5

Performed calculations to determine whether or not MNB can make additional loans, and correctly identified an amount if new loans are possible. Accurately showed what the balance sheet would look like after making any additional new loans possible.

10

Correctly explained whether or not the money supply would change if all possible loans are made. Correctly identified an amount if the money supply were to change.  Explained how the money supply would change over time.  

5

Accurately described all changes that would occur if the Fed imposed a more restrictive monetary policy, increasing reserve requirements from 10% to 20%. Showed what the revised balance sheet would look like as a result of this change.

5

Wrote in a clear and concise manner following APA standards, and demonstrated ethical scholarship in accurate representation of sources

5

Total Points Possible

50

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