Homework

Case 1 (250 Words)

“Sorting among the Multipliers”

The head of the central bank of a small African nation is trying to determine whether the M1 or M2 money multiplier has been more stable during recent years, in the hope of deciding which monetary aggregate to emphasize during the next few years. Studies by economists at the central bank indicate the following:

·        

The ratio of excess reserves to transactions deposits has been highly variable and is likely to remain equally volatile during the next several years.

·         The currency-deposit ratio has been and is likely to remain relatively stable.

·         The ratio of non-transactions deposits to transactions deposits increased by a factor of 10 during the past five years and may increase by an equal magnitude during the coming five years.

·         One final piece of information is that the required reserve ratio is equal to 20 percent for both transaction and non-transaction deposits.

Given this information, which monetary aggregate should the central bank head choose to emphasize?

 

Case 2 (550 Words)

Does dollarization benefit developing countries?

 

Dollarization occurs when a nation allows the currency of another nation to be used as a legal currency.  That is partial dollarization.  Full dollarization, while less frequent, occurs when a nation discontinues it’s own currency and replaces it with the currency of another country.  Most commonly the foreign currency is the US Dollar, but the Euro is used by a number of European countries that are not part of the European Union.

 

Review the Dollarization document provided, information in the textbook, as well as web based sources.  A good approach is to examine a specific country that has dollarized.  

You then take the information you have learned and present it as a formal case study report.  For this case a specific recommendation is not required.  After a discussion of what dollarization is and the advantages and disadvantages of dollarization, you would conclude with a brief review of the conditions under which a country would benefit from dollarization.  That becomes an implicit recommendation to dollarize when those conditions exist.  Alternatively, if you conclude that dollarization is not a benefit, then you would explain why you recommend that nations not dollarize.

Case Studies follow the following general format:

 

·         An Introduction where you explain the situation and the decision(s) facing the firm. Most, if not all, of this information will be in the case.

·         Alternatives
: here you define terms as needed and identify the alternative available to the firm.

·         Evaluate the alternatives
: discuss the advantages and disadvantages of each of the relevant alternatives.

 

·         Recommendation and conclusion
: select one of the alternatives as your recommendation. Support your recommendation with information used in your case analysis.

·         Provide specific and detailed recommendations.

 

·         Use additional resources as needed, but remember to cite and reference them properly using APA style.

·         In a case you apply your knowledge of the material being covered in the class. As well as using your analysis skills as applied to the case

Case

1

(25

0 Words

)

“Sorting among the Multipliers”

The head of the central bank of a small African nation is trying to determine

whet

her the M1 or M2 money multiplier has been more stable during recent

years, in the hope of deciding which monetary aggregate to emphasize during

the next few

years.

Studies by economists at the central bank indicate the

following:

·

The ratio of excess reser

ves to transactions deposits has been highly

variable and is likely to remain equally volatile during the next several

years.
·

The currency

–

deposit ratio has been and is likely to remain relatively

stable.

·

The ratio of non

–

transactions deposits to transacti

ons deposits increased

by a factor of 10 during the past five years and may increase by an equal

magnitude during the coming five years.

·

One final piece of information is that the required reserve ratio is equal to

20 percent for both transaction and non

–

transaction deposits.

Given this information, which monetary aggregate should the central bank

head choose to emphasize?

Case 2

(55

0 Words)

Does dollar

ization benefit developing countries?

Dollarization occurs when a nation allows the currency of another nation to be

used as a legal currency.

 

That is partial dollarization.

 

Full dollarization, while

less frequent, occurs when a nation discontinues it’

s own currency and replaces

it with the currency of another country.

 

Most commonly the foreign currency is

the US Dollar, but the Euro is used by a number of European countries that are

not part of the European Union.

Review the Dollarization document provided, information in the textbook, as well as web based sources.  A good approach is to examine a specific country that has dollarized.  

You then take the information you have learned and present it as a formal case study report.  For this case a specific recommendation is not required.  After a discussion of what dollarization is and the advantages and disadvantages of dollarization, you would conclude with a brief review of the conditions under which a country would benefit from dollarization.  That becomes an implicit recommendation to dollarize when those conditions exist.  Alternatively, if you conclude that dollarization is not a benefit, then you would explain why you recommend that nations not dollarize.

Case Studies follow the following general format:

· An Introduction where you explain the situation and the decision(s) facing the firm. Most, if not all, of this information will be in the case.

· Alternatives: here you define terms as needed and identify the alternative available to the firm.

· Evaluate the alternatives: discuss the advantages and disadvantages of each of the relevant alternatives.

· Recommendation and conclusion: select one of the alternatives as your recommendation. Support your recommendation with information used in your case analysis.

· Provide specific and detailed recommendations.

· Use additional resources as needed, but remember to cite and reference them properly using APA style. (

Apa.pptx

).

· In a case you apply your knowledge of the material being covered in the class. As well as using your analysis skills as applied to the case

Case 1

(250 Words)

“Sorting among the Multipliers”

The head of the central bank of a small African nation is trying to determine
whet
her the M1 or M2 money multiplier has been more stable during recent
years, in the hope of deciding which monetary aggregate to emphasize during
the next few years. Studies by economists at the central bank indicate the
following:

·

The ratio of excess reser
ves to transactions deposits has been highly
variable and is likely to remain equally volatile during the next several
years.

·

The currency
–
deposit ratio has been and is likely to remain relatively
stable.

·

The ratio of non
–
transactions deposits to transacti
ons deposits increased
by a factor of 10 during the past five years and may increase by an equal
magnitude during the coming five years.

·

One final piece of information is that the required reserve ratio is equal to
20 percent for both transaction and non
–
transaction deposits.

Given this information, which monetary aggregate should the central bank
head choose to emphasize?

Case 2

(55
0 Words
)

Does dollar
ization benefit developing countries?

Dollarization occurs when a nation allows the currency of another nation to be
used as a legal currency.

That is partial dollarization.

Full dollarization, while
less frequent, occurs when a nation discontinues it’
s own currency and replaces
it with the currency of another country.

Most commonly the foreign currency is
the US Dollar, but the Euro is used by a number of European countries that are
not part of the European Union.