Monetary Policy and Bank Regulation
Purpose
In this chapter, you have learned about the structure and functions of the Federal Reserve Bank (Fed) in the U.S. You have also learned how banks are supervised, regulated, and insured. Furthermore, you have discovered how the Fed implements monetary policy and quantitative easing, along with how these policies affect broader macroeconomic variables. Last, you have analyzed the potential pitfalls (downsides) of implementing monetary policy in regard to macroeconomic outcomes.
The purpose of this exercise is to understand how the Fed functions and the differences between monetary policy and quantitative easing (QE). You will also compare and contrast the Fed's historical monetary policies.
Directions
This exercise has two parts. In the first, you will read about banks during the Great Recession. Then, you will reflect on this information, using what you learned in the chapter. In the second, you will use resources to review and compare/contrast monetary policy with quantitative easing.
Part 1 - Compare How Bank Regulation Works in Theory versus Lived Experiences
Review Lesson 15.2 and check out the following articles on the Great Recession and its effect on banking:
Explain how the classic model of bank regulation operates and then compare it to the behavior of U.S. banks leading up to and during the Great Recession.
Using specific examples from the articles, explain how the banking sector was reformed in the immediate aftermath of the Great Recession.
Part 2 - Compare and Contrast Traditional Monetary Policy with QE
Review Lesson 15.4 and check out the following articles. Also, consider the video in the first article.
Compare and contrast traditional monetary policy with quantitative easing.
Evaluate the monetary policy/QE regimens during the Great Depression with those employed during the Great Recession. How are they the same? How are they different? What was the effect? Then evaluate the monetary policy/QE regimens during the COVID-19 pandemic. How did it differ from the Great Recession?