Homework Answers
Q1) Money is anything that can be used to facilitate transactions in an economy. It must be readily accepted as a medium of exchange so that transactions can occur. It should act as a store of value so that people can store their wealth in the form of money. It should act as a unit of account so that different values can be used while transacting.
Q2) Financial institutions are required to keep reserves to protect the depositors. If the banks do not keep reserves and if on a particular day there is a large number of depositors who want to withdraw their money, the bank can not service the request and it will lead to a crisis. Thus, there is a minimum reserve to be maintained so that the depositors can be paid out of that reserve safely and timely.
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Short Essay Questions 1. What is money? Explain in terms of the functions of money. (2...
What are the four principal tools of monetary policy? Explain how they can be used.
What are the four principal tools of monetary policy? Explain how they can be used.
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2. Explain the following questions regarding monetary policy. 2.1.Discuss the three monetary policy tools of the Federal Reserve. 2.2.Explain how each monetary policy tool can be used to change the money supply and equilibrium interest rate in the U.S. 2.3.Using the IS-LM graph, what will happen to the equilibrium interest rate (i*) and equilibrium GDP (Y*) when the monetary policy action described in Question 2.2 is conducted. 2.4.Using the IS-LM model, explain in which situations such a monetary policy action...
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Please answer the following questions: 1) Identify the goals of monetary policy. 2) Explain the difference...
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1. MONEY, MONETARY AGGREGATES AND INFLATION a. What are the four functions of money? Explain each...
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1. Why do people hold money? 2. What are the tools of monetary policy and how...
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What FUNCTIONS do Central Banks perform in a market-oriented economy? Explain why each function you have...
What FUNCTIONS do Central Banks perform in a market-oriented economy? Explain why each function you have listed is important in the functioning of a market-oriented economic system? Which of these functions is the most important? 1) a) What are the principal goals that Central Banks pursue as they work to carry out monetary policy? b) In what ways are commercial banks of special importance to the functioning of the money and capital markets and the economy? c) The name COMMERCIAL...
2. List and explain the logic behind the "four functions of money." Then, consider the following:...
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What are the Fed's three policy tools? The Fed's three policy tools are A. banking regulations,...
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2. Explain the following questions regarding monetary policy. 2.1.Discuss the three monetary policy tools of the Federal Reserve. 2.2.Explain how each monetary policy tool can be used to change the money supply and equilibrium interest rate in the U.S. 2.3.Using the IS-LM graph, what will happen to the equilibrium interest rate (i*) and equilibrium GDP (Y*) when the monetary policy action described in Question 2.2 is conducted. 2.4.Using the IS-LM model, explain in which situations such a monetary policy action...
1. MONEY, MONETARY AGGREGATES AND INFLATION a. What are the four functions of money? Explain each briefly b. What is included in MI? In M2? c. What is the most common form of money used by Americans? d. Write the equation that represent the Quantity Theory of Money. c. According to the quantity theory of money, if the cconomy is operating at full employment what happens when the money supply increases? e. Suppose the Fed want the rate of inflation...
What FUNCTIONS do Central Banks perform in a market-oriented economy? Explain why each function you have listed is important in the functioning of a market-oriented economic system? Which of these functions is the most important? 1) a) What are the principal goals that Central Banks pursue as they work to carry out monetary policy? b) In what ways are commercial banks of special importance to the functioning of the money and capital markets and the economy? c) The name COMMERCIAL...
2. List and explain the logic behind the "four functions of money." Then, consider the following: In many prisons, cigarettes are used as money. Do cigarettes in prison have the ability to satisfy these four functions? Explain. (20 possible points)
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