What are the benefits and the costs (short run and long run) of direct government or central bank intervention when financial markets fail? What principles can guide our decisions about whether or not to undertake this intervention? Use specific economic terminology in you post.

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Irving HeathcoteLv2

3 Jan 2019

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What are the benefits and the costs of financial regulation to keep financial crises from happening in the first place? What principles can guide our decisions about whether or not to implement regulation? Cite specific regulation in your post.

Immediately after an ice storm brought down power lines throughout the region, hardware stores were sold out of batteries and flashlights. However, within a couple of days, special deliveries brought in extra batteries and flashlights, and everyone who wanted to buy a flashlight or batteries was able to do so. Which of the following principles of economic interaction best describes this scenario?

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Changes in the quantity of money lead to real changes in the economy. If this is the case, why would the central bank ever stop increasing the money supply?

a. Increasing the money supply is not a politically popular action and may lead to leaders of the central bank not getting reelected

b. The government has rules in place on the maximum amount the money supply can be increased in a given fiscal year

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