Question

4. Please briefly describe the functions of money according to theory of money. What is the main difference between the narrow definition of money and broad definitions of money? Give an example for each definitions by using money definitions of the Central Bank of Turkey. (15 pts.) 5. Please kindly select the True/False expressions for the following choices: (20 pts.) a) A period of very rapid increase in the overall price level is known as b) If the labor force is 50 million and 48 million are employed then the c) Aggregate demand is the total demand for goods and services in an entire inflation. unemployment rate is 2%. economy d) There is very little disagreement when it comes to macroeconomic theory e) The overall sum of all the entries in the balance of payments must be zero. 6. Please discuss the relationship between injections and withdrawals in the related institutions on the macroeconomic perspective. Show the inner flow and circular flow of income diagram. Briefly explain the components of cru balance in the light of this finding. (15 pts.) rrent GOOD LUCK... Jan. 8th, 2019 Engin KURUN, Ph.D

Answer 1

4. The theory of money states that the general price level of goods and services is directly proportional to the money with public i.e, the money in circulation. When there is a change in supply of money, there is a proportional change in price level and vice versa. Broad money is the inclusive method of calculating a country’s money supply. Broad money may include various deposit based accounts that would take more than 24 hours to reach maturity and be considered accessible. Narrow money is a category of money that includes all physical money such as coins and currency, demand deposits and other liquid assets . Narrow money only contains the most liquid assets .