Research Work 2

• Economie
• Tertiary Education

Question

How does the comments from the Fed affect the financial markets?

How?

Chapter 16:

The Federal Reserve and Monetary Policy

Objectives

Describe the signals of Fed to the financial markets

Analyze the information from the Fed

Discuss the actions of Fed affecting the financial markets

Read the case study on page 504

Answer the questions given below

Why does the Fed chairman need to develop
strong communication techniques ? ​

Answer

If the Fed chairman is not completely clear when making statements, the

markets may respond in a negative way

How does the Fed help the banking system?

What message does the cartoon
convey about how the Fed has been known to give information?

Answer

The Fed has not been completely clear in the way it delivers information.

In what way might Bernanke be following
in Greenspan’s footsteps?

What kind of monetary policy did investors expect Bernanke to
follow -expansionary or contractionary policy? Explain your answer.​

Answer

contractionary policy, to combat inflation

How do articles A and C illustrate the rational expectations theory?

Based on these three sources and your own knowledge, how would you describe the differences
and similarities between Greenspan and Bernanke and their impact on the market?

Answer

Bernanke’s speaking style seems to be somewhat more forthright than Greenspan’s, and the markets are having trouble working out exactly how to react to what Bernanke says.

What are the important points of the lesson?