1.Consider the following questions. • The hierarchy of money and the four prices
ID: 1189213 • Letter: 1
Question
1.Consider the following questions.
• The hierarchy of money and the four prices of money.
• The major items on the balance sheet of typical banks and central banks (the Fed).
• The advantages of using a clearinghouse for transaction settlement.
• The dierences between the modern payments networks: CHIPS vs Fedwire
• The mechanics of Open Market Operations (actions that the Fed takes to / the r) • The use of Fed funds and repo transactions in banks’ funding operations.
2. Consider the following questions.
(a) Answer the question “what determines the value of money?” from the perspective of both char-
talists and metallists.
(b) Discuss how seasonal instability in agricultural production created nancial instability under the National Banking System.
(c) Was the supply of money under the National Banking System elastic or inelastic; that is, was the system based on the “currency principle” or the “banking principle”?
(d) What is the dierence between the “economist’s story” and the “anthropologist’s story” of the origins of money?
(e) Suppose Bank A has no excess reserves. A customer of Bank A wants to take out a loan from the bank; will Bank A be able to make the loan? Why or why not?
(f) How could the discount rate and the rate of interest paid on excess reserves (IOER) theoretically be used by the Fed to create a “ceiling” and “oor” for the Fed funds rate?
(g) Why are most Eurodollar deposits “time deposits”?
Explanation / Answer
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