Econ 4210: Money and Credit
Instructions: You may work in groups of up to 3 students. List the name
of every student in the group on the front page. Each group member need to
submit (the same file) via Canvas. Your answers should be approximately 2
pages with 1 1/2 spacing and 12 point font. (Small deviations are tolerated.)
Grades assigned will be 100 (very good), 75 (good) or 50 (sufficient).
Deadline: Midnight Thursday April 8.
Read the Federal Reserve Board of Governors’ Financial Stability Report for May 2020 (posted on Canvas). In essay form, address the following
questions using the tools learned in class:
1. How could a health crisis like the COVID pandemic potentially turn
into a financial crisis?
2. What are the key actions the Federal Reserve took to support the
economy over the last year?
3. What is the economic mechanism through which these actions may
have helped prevent a more severe economic crisis?
4. Expectations of government bailouts may lead to moral hazard problems. Is that something we should worry about in the context of the
Federal Reserve’s support for financial markets during the COVID pandemic? Why or why not?