by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Banks? Somebody once asked the late bank robber named Willie Sutton why he robbed banks. He answered: “That’s where the money is.” While this may have been true at one time, from the perspective of modern economists, Sutton is both right and wrong. He is...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Growth Consensus? The Growth Consensus concerns the extent to which there is consensus among analysts or stakeholders concerning the growth achieved by a company or in an economy.
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Asset Bubbles and Leverage Cycles? One long-standing concern about having the central bank focus on inflation and unemployment is that it may be overlooking certain other economic problems that are coming in the future. For example, from 1994 to 2000 during...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Central Banks affect Unemployment and Inflation?If you were to survey central bankers around the world and ask them what they believe should be the primary task of monetary policy, the most popular answer by far would be fighting inflation. Most central bankers...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Excess Reserves?Banks are legally required to hold a minimum level of reserves, but no rule prohibits them from holding additional excess reserves above the legally mandated limit. For example, during a recession banks may be hesitant to lend, because they...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Bank Regulation?A safe and stable national financial system is a critical concern of the Federal Reserve. The goal is not only to protect individuals’ savings, but to protect the integrity of the financial system itself. This esoteric task is usually behind...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are the Functions of Money? Money solves the problems that the barter system creates. The functions of money include: Medium of Exchange Store of Value Unit of Account Standard of Deferred Payment What is a Medium of Exchange? First, money serves as a medium of...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Monetary Policy affect Aggregate Demand? Monetary policy affects interest rates and the available quantity of loanable funds, which in turn affects several components of aggregate demand. Tight or contractionary monetary policy that leads to higher interest...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Central Banks Carry Out Monetary Policy? Central Banks carry out monetary policy through setting the overnight interest rate, setting bank capital reserve requirements, and other techniques (such as quantitative easing) to manage the money supply in the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Deposit Insurance? To protect against bank runs, Congress has put two strategies into place: deposit insurance and the lender of last resort. Deposit insurance is an insurance system that makes sure depositors in a bank do not lose their money, even if the...
