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In: Historical Events

Submitted By yanki
Words 258
Pages 2
1.) Monetary policy from The Fed can facilitate to achieve economic stability, because it unt of credit and amount of money in circulation. Changes in these effect interest rates. If they are low, it is more likely increase borrowing.

2.) Provisional liquidity can achieve financial stability by helping to soothe financial panics, by providing short term loans to financial institutions as a last resort. The role of lender of last resort provides apossible fail safe in providing liquid assets to cover immediate losses of solvent but illiquid firms.

3.) Long and short term illiquid assets and liabilities could contribute to a financial panic if there is a run on a financial intuition as they would not be able to liquidate the amount needed.
B.) Illiquid banks do not have the money available to cover monetaryobligations. An insolvent bank owes more than it owns.

4.) Among a few of the events, the StockMarket crashed in 1929, financial repercussions from WW1, the structure of the international gold standard and The Fed failure to be a lender of last resort having too tight of a monetary policy, all contributed to the economic melt down. The gold standard held rates higher than most anyone could actually afford. Output fell due to no investments and no money to pay for production. Over 9700 banks suspend operations between 1929 and 1933.

5.) The establishment of the FDIC in 1934 was a very successful tool in helping the economy stabilize and stopping bank runs, in turn helping to stop the massive bank closure…...

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