31. Why do presidents typically reappoint Chairs of the Federal Reserve Board even when they were originally
appointed by a president of a different political party?
32. In what ways might monetary policy be superior to fiscal policy? In what ways might it be inferior?
33. The term “moral hazard” describes increases in risky behavior resulting from efforts to make that
behavior safer. How does the concept of moral hazard apply to deposit insurance and other bank
regulations?
34. Explain what would happen if banks were notified they had to increase their required reserves by one
percentage point from, say, 9% to10% of deposits. What would their options be to come up with the cash?
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35. A well-known economic model called the Phillips Curve (discussed in The Keynesian Perspective chapter)
describes the short run tradeoff typically observed between inflation and unemployment. Based on the
discussion of expansionary and contractionary monetary policy, explain why one of these variables
usually falls when the other rises.
36. How does rule-based monetary policy differ from discretionary monetary policy (that is, monetary policy
not based on a rule)? What are some of the arguments for each?
37. Is it preferable for central banks to primarily target inflation or unemployment? Why?