Loanable Funds, economics homework helpc

Here are several statements from the business press. Outline your understanding of each, including the chain of events, using diagrams or flowcharts, such as those employed in class, if appropriate:

a) “The argument that it is impossible to shrink the Fed’s balance sheet [bloated by quantitative easing] to prevent excessive monetary expansion is nonsense. The Fed has tools at its disposal to do so”. (Suggest at least two such tools and explain how they might work).

b) “If the Bank of Canada lowers its target rate of inflation, it would have a profound impact on Canadian bond prices and dividend-paying stocks”

c) “The Bank of Canada’s monetary policy can keep inflation at 2% or any other target rate it chooses”

d) “The 2008-2009 recession had its origin in the collapse of US housing prices”

e) “The Federal Reserve Board [the US central bank] intervention can put a floor under the US dollar [meaning the exchange rate of the U.S. dollar], but some of its policy instruments have limitations and others have potential negative side effects”. Discuss two policy instruments and their limitations and/or negative side effects

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