Tugas Pertemuan 7
1. “Banks and central banks create money, but central banks can also create the
reserves that allow ordinary banks to create money equal to some multiple of those
reserves.” Explain why you agree or disagree.
2. “Though the discount rate is usually set to follow the market, discount-rate changes
often add impetus to cyclical trends in credit conditions.” Discuss.
3. Discuss the possibility that the long-run effect of a Fed policy might cause interest
rates to move in a direction exactly opposite to the direction that should be expected
in the short run. (Think of economic conditions that might be created by, e.g., a
successful Fed action to lower inflation.)
4. What process begins if the real rate of interest in the United States rises above that
available in other countries? When does the process stop? What effect does it have
on the ability of the Fed to fight inflation?
5. Discuss the following statement: “Gold movements affected prices only because we
used them as a barometer, signaling us to expand or contract the total money
supply. Of course, the gold standard was a defective system; but it was wiser to tie
ourselves to such an imperfect system than to trust corrupt and politicking
legislatures whose tendency is always to print inflationary paper money.” Relate
your discussion to the independence of the Fed and recent moves to diminish that
6. Discuss the following statement made by the Federal Reserve Board: “The Federal
Reserve System can see to it that banks have enough reserves to make money
available to commerce, industry, and agriculture at low rates; but it cannot make the
people borrow, and it cannot make the public spend.”