Monetary policy

There are 11 questions below, use 5-7 sentences for each question based on researched facts and logical analysis.

1) What kinds of Monetary policy(easy or tight) should be exercised under the inflationary gap? Give examples of policy tools in terms of RRR(Required Reserve Ratio), DR(Discount rate) and OMP(open market policy) and show how these specific monetary policy tools work.
2) Explain the” MONEY MULTIPLIER” of money creation including the formula and the process.
3) Compare discount rate, federal fund rate, prime(lending) rate and deposit rate.
4) Discuss the relationship between Bond price and interest rate.
5) Discuss Keynesian Transmission Mechanism showing relationship between monetary policy and consequence over GDP change to overcome inflation.
6) Explain two possible failure of monetary policy in Keynesian Transmission mechanism in terms of liquidity trap and vertical investment schedule.

Monetary policy
On December 16th, 2015, FED decided to raise first time the record low target rate of federal reserve fund from 1/4% to 1/2%.
On December 14th, 2016, Fed decided to raise the second time the federal fund rate from 1/2% to 3/4%.
On March 15th, 2017, Fed decided to raise the federal fund rate from 3/4% to 1%.
On June 14th, 2017, Fed decided to raise the federal fund rate from 1% to 1.25%.
On December 13th, 2017, Fed decided to raise the federal fund rate from 1.25% to 1.5%.
On March 21st, 2018, Fed decided to raise the federal fund rate from 1.5% to 1.75%.
On June 13th, 2018, Fed decided to raise the federal fund rate from 1.75% to 2 %.
On September 26th, 2018, Fed decided to raise the federal fund rate from 2% to 2.25%.
On DEcember 19th, 2018, Fed decided to raise the federal fund rate from 2.25% to 2.5%
Fed agrees that economic recovery is solid, Also Fed feels that the job market is strengthening and the long term inflation signs stabilized. But Fed also feel it is not necessary to maintain such accommodating easy monetary policy including very low interest rate since the unemployment remains low and inflation rate stays to remain near 2.0%.
Fed decided that the size of the mortgage bond purchase as QE policy was winding down on October 2014 as the economy continues to improve.
The future rate hike will be gradual, depending upon the upcoming economic indicators.

1) What’s your opinion about the Fed policy decision by next FOMC meeting?
2) Do you feel that this near zero interest was necessary one, or may not work to save declining economy , due to liquidity trap? or can we be back in double dip recession due to too early exit strategy by the FED’s tight monetary policy?
3) Are you concerned about the inflation come back due to such easy monetary policy with zero interest rate for long time? if so, how fast is the Fed supposed to tighten its monetary policy as an normalizing strategy?
4) Will the new president’s proposal of spending increase on infrastructure and defense as well as tax cut on corporate income tax and individual income tax may overheat US economy to be inflationary? if so, will it cause Fed to speed up the rate hike? If Tariff over trade and possible retaliation could be inflationary, does it give another incentice for Fed to speed the rate hike?

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