1:1 Explain the logic underlying the law of one price and the theory of purchasing power parity.
1.2 How will a decrease in the federal government’s budget deficit affect the equilibrium interest rate in the bond market? Explain using the bond demand and supply framework.(at least 150 words)
1.3:Distinguish between adverse selection and moral hazard.
1.4 What are a bank’s major sources and uses of funds?(at least 150 words)
1.5:Describe the structure and responsibility for policy tools in The Federal Reserve System
1.6:Describe what criteria is applied when choosing a policy instrument(at least 150words).
7:How is credit risk related to the concepts of adverse selection and moral hazard?(100words)