Course: Financial Institutions, Markets & Money

You are the President of the Federal Reserve Bank of New York. You have been asked by Chairwoman Yellin for your opinion on monetary policy and what steps you feel the Fed needs to take, if any, to encourage economic expansion (GDP growth). Under the current economic conditions, what would your recommendation(s) to the Chairman be? This should be in memo form and have three sections detailed below:

Introduction - Summarize current economic conditions - GDP, exchange rates, interest rates, money supply, stock market and the bond market. Discuss Fed actions taken thus far and what that impact is (Fed Funds, QE 3, Operation Twist, etc.). State, in terms of monetary policy objectives, why it is the responsibility of the Fed to take action and what you think the primary Fed objective should be in terms of its six monetary policy goals and why.

Analysis - Discuss at least two monetary policy tools that you COULD use, the advantages and disadvantages of each, and the effects each has on GDP, exchange rates, interest rates, money supply, stock market and the bond market. Also discuss actions outside the purview of the Fed, such as the regulatory climate.

Recommendation(s) - A coherent summary of the monetary policy steps you feel need to be taken, if any, and how they will achieve your stated objectives. If you feel no action needs to be taken, explain why. Your recommendation should be supported in terms of the above stated economic conditions, i.e. GDP, exchange rates, interest rates, money supply, etc. and how your recommended actions (or non-action) would effect these conditions. You may also include recommendations outside of monetary policy, such as regulatory solutions.

Write this in the memo format on the next page and submit as a Word document. Limit this to no more than five pages, double spaced and Arial 12 font.