How do central banks, like the U.S. Federal Reserve, contribute to the welfare of a society?
What will be an ideal response?
One of the core principles is that stability improves welfare (primarily by reducing risk). One of the functions of a central bank is to try to get rid of the risk that people cannot get rid of on their own, like the risk that comes from economic fluctuations, volatile price level changes or volatility in economic growth. To whatever degree the central bank can smooth these fluctuations, risk can be reduced and the overall welfare of a society can be improved.
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What Causes Rates to Change?
Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?
a. both U.S. net exports and U.S. net capital outflow rise b. both U.S. net exports and U.S. net capital outflow fall c. U.S. net exports rise and U.S. net capital outflow fall d. U.S. net exports fall and U.S. net capital outflow rise
When firms exit a monopolistically competitive market: a. product variety diminishes
b. prices fall. c. profits decrease (losses increase). d. the demand curves of established firms shift to the right.
Samantha quit her job in the city to look for a job in the country. While she is looking, Samantha experiences _______ unemployment.
A. Structural B. Seasonal C. Frictional D. Cyclical