BUS 3401 FIT Corporate Finance Questions

I want you to check my homework. This is my homework: The Federal Reserve System is an independent central bank that is responsible for implementing monetary policy in the United States. If a new Congress and administration overrule the independence of the Fed and force it to greatly expand the money supply, this could have significant effects on the economy and financial markets.A. On the level and slope of the yield curve immediately after the announcement?In the short term, the announcement of a large expansion of the money supply could lead to an increase in inflation expectations, which would cause an upward shift in the entire yield curve. This is because bond investors would demand higher yields to compensate for the expected increase in inflation. Additionally, an increase in the money supply could lead to a decrease in short-term interest rates, which would cause the yield curve to become steeper. This is because long-term interest rates are typically higher than short-term interest rates, and a decrease in short-term rates would increase the spread between short- and long-term rates.B. On the level and slope of the yield curve that would exist two to three years in the future?In the longer term, the effects of a large expansion of the money supply would depend on a number of factors, including the magnitude and duration of the expansion, the state of the economy, and the actions of other central banks around the world. In general, however, a large and sustained increase in the money supply could lead to higher inflation, which would cause the entire yield curve to shift upward as bond investors demand higher yields to compensate for the expected increase in inflation. This could cause the yield curve to become flatter as short-term interest rates rise to keep inflation in check, while long-term interest rates remain relatively stable. However, the exact effects would depend on the specific circumstances and policy decisions at the time.