Assignment: The Money Market

Submit a 4- to 5-page paper that addresses the following questions. Be sure to use references within the paper to support your answers.

1. Are credit cards or debit cards money? Explain your answer.

2. "When the Fed makes an open market purchase of government securities, the quantity of money will eventually decrease by a fraction of the initial change in the monetary base." Is the previous statement correct or incorrect? Explain your answer.

3. Monetary policy is action taken by the Fed to influence the level of real GDP. Suppose the Fed wants to increase the money supply. What three tools could the Fed use to achieve this goal? Be specific in your answer and discuss the implications of this policy.

4. The problem typically during a recession is not that there is too little money, but too little spending. If the problem was too little money, what would be its cause? If the problem was too little spending, what could be its cause? (Be sure to use some concepts from the previous module as well).

Assignment Expectations

Use concepts from the modular background readings as well as any good quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.

Length: 4-5 pages double-spaced and typed.

The following items will be assessed in particular:

• Your ability to understand an application of monetary policy.
• Some in-text references to the modular background material (APA formatting recommended).
• The essay should address each element of the assignment. Remember to support your answers with solid references including the Case readings.