Monetary Policy and Equation of Exchange
The monetary policy has been defined as the policy that is used by the Federal Reserve (the central bank of the US) or the central bank (the central bank of India is RBI) along with the use of the supply of money to accomplish certain macroeconomic policies. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.
Monetary Economics
As from the name, it is very evident that monetary economics deals with the monetary theory of economics. Therefore, we can say that monetary economics, is that part of economics that provides us with the idea or notion of analyzing money as a holding with its function, which acts as the medium of exchange, the store of value through which the buying and selling are done and also the unit of account. It also helps in formulating the framework of the monetary policy of a bank in an economy which ultimately results in the welfare of the people residing in that particular economy. The monetary policy of an economy also helps to analyze and evaluate the financial health of it.
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Create a graph of equilibrium in the IS-LM model. Show the effect of an expansionary
The IS-LM model was developed by Hicks- Hansen. This model shows the relationship between asset market and interest rates. Where the IS (Investment Saving ) intersects with the LM (Liquidity Preference Money supply) it is referred as “general equilibrium”.
IS-LM is a macroeconomic standard tool that states the relationship between real output and interest rates in the goods and services market and the money market.E is the point of intersection between both the markets that the point where IS is equal to LM. r is the equilibrium interest rate and Q is the equilibrium output/income. The IS-LM model is based on the consumption function, investment-demand function, quantity of money and the money demand function.
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