In many countries, people hold money as a cushion against unexpected needs arising from a variety of potential scenarios (e.g.,banking crisis, natural disasters, health problems, unemployment, etc.) that are not usually covers by insurance markets.  Explain the effect of such behavior on the precautionary component of the demand for money?

Q: Which one of the following statements is NOT true?  (a)     Money is the most liquid asset. (b)…

A: NOTE: We'll answer the first question only as the exact one wasn’t specified. Please submit a new…

Q: Why is the income elasticity of demand for money in precautionary motive, greater than the income…

A: In an economy , people make demand for money for different purposes such that transaction demand ,…

Q: Suppose the law changes and the corporate income tax rate has been cut in half.  As a result,…

A: Due to cut in corporate income tax, corporation decides to purchase new buildings and equipment.…

Q: Money demand curve is downward sloping because as interest rate rises, businesses find it less…

A: The curve that depicts the inverse relationship between the rate of interest and the quantity of…

Q: What is the significance of liquidity with respect to money supply and money demand?

A: As the Central bank tightens the monetary policy, it removes liquidity from the economy by selling…

Q: Explain why each of the following statements is True, False, or Uncertain according to economic…

A: In an economy, when analyzing the international bete goods market and money market, IS-LM model is…

Q: show that the friedman´s money equation is simply an extension of the general theory of demand for…

A: Quantity theory of money (QTM) states that the overall value level of commodity and services is…

Q: All things been equal,how can increase in interest rate affect the demand for money? (a). Demand…

A: Demand for money represents the desire of people to hold financial assets in the form of cash and…

Q: discuss the scope of monetary economics and its importance to the feild of economics

A: Monetary economics empowers us to comprehend how an economy works proficiently as well as how the…

Q: Naked Economics: Undressing the Dismal Science Book by Charles Wheelan   Please refer to the chapter…

A: Money is anything that is generally accepted by the general public and it performs various functions…

Q: Explain Money super-neutrality as a concept of monetary economics.

A: Money as a neutral concept implies that the changes would have no effect on the real variables, only…

Q: When can we be certain that the quantity of money demanded will decrease? When nominal GDP increases…

A: When the rate of interest increases, then people will demand a lower amount of money and they will…

Q: A decrease in income ________. Select one: a. all of the given options b. leads to a leftward shift…

A: Income is a factor affecting demand of the product.

Q: Why is the money multiplier considered to be a potential multiplier rather than an indication of…

A: When an individual deposits money into the bank the bank does not hold the money, they hold  portion…

Q: As a lender/depositor, how would you compare time to demand deposits?     Demand deposits are more…

A: Meaning of Demand Deposit: The term demand deposits refer to the situation under which an…

Q: If the government wants to increase employment, what should it do among the following?    a.…

A: The Reserve ratio refers to the proportion of the deposited money (bank's liability), which a…

Q: What links the principle of the fisher effect and quantity theory of money?

A: Money, prices and inflation are the three building blocks of the economy’s overall price level. The…

Q: Consider the money market equilibrium. If there is an increase in credit card fraud then people will…

A: When credit card frauds increases then the depositors are not able to trust the banks. This is…

Q: If banks start paying higher interest rates on checking accounts, we would expect, assuming…

A: Since according to your question so next best option is given below

Q: A central bank that increases the money supply in its economy has more effect on spending the more…

A: It's typical to hear that the central bank "increased interest rates" or "lowered interest rates"…

Q: Money Supply increases, the equilibrium interest rate will:

A: ‘Interest rate’ is the cost of borrowing money.  Thus, when there is an increase in money supply in…

Q: 1. During the most recent financial crisis, the Fed conducted large open market operations. The…

A: The monetary policy is operated by the central bank to produce the desirable and positive impacts in…

Q: Explain the relationship between the effectiveness of monetary policy and the interest elasticity of…

A: Monetary policy includes changing the level of the money supply in the economy in order to affect…

Q: Explain with the aid of a graph, the impact of a cut in interest rate on the demand for money

A: Demand for Money There are three motives for holding money in the Keynesian framework and can now…

Q: Consider the portfolio choice theory of money demand. How do you think the demand for money would be…

A: (Q) Consider the portfolio choice theory of money demand. How do you think the demand for money…

Q: What is the most likely effect of financial innovation and increasing real GDP, respectively, on the…

A: Money market is a market where short-term securities are exchanged. In this market, the interest…

Q: Explain exogenous versus endogenous money supply with the help of diagram

A: The “money supply” is exogenous if we believe that it is set directly by the central bank; private…

Q: 1.6 Which of the following will cause the demand curve for money to shift to the right? (a) An…

A: the demand curve for money to shift to the

Q: Write a money demand function and explain the determinants of money demand.

A: The desired holding of financial assets being in form of money including bank or cash deposits…

Q: Households can only be considered as suppliers of funds in the financial market. * a. True b. False…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Explain, with the aid of a graph, the effect of an interest rate decrease on the money market…

A: Depending on interest rates, the quantity of money people keep on hand to pay for transactions and…

Q: Q.1.The ________ demand for money arises out of the need to hold money as a medium of exchange. This…

A: NOTE:  Money is a medium of exchange, store of value and unit of account.

Q: What are called Z factors? Explain how does a change in any of the Z factors lead to a change in…

A: Monetary policy: It refers to the money supply that is controlled by the government or central bank…

Q: IS curve shows: (a) that realized savings are most likely a function of interest rates, because…

A: IS is negative sloping curve that shows inverse relationship between interest rate and income/output…

Q: briefly explain the three specific funtions of money that economists identified

A: Main three primary function of money are - 1) medium of exchange - this is the most important…

Q: If the central bank’s goal is to maximize output, what interest rate will we expect in equilibrium?…

A: The central bank employs monetary policy to influence the output of the economy by varying the…

Q: Explain on the impact of a drop in the discount rate on the supply of money in the market.

A: Discount rate is the rate of interest which Fed or any other nations Central Bank charges from their…

Q: How are the wealth effect and the household liquidityeffect similar? How are they different?

A: Wealth: It is comprehensively characterized as resources or assets, fewer liabilities (total…

Q: According to the principle of monetary neutrality, which variables are affected by changes in the…

A: Nominal variables refer to variables that are measured in monetary units, whereas, real variables…

Q: Explain the concept of a surplus of money versus a shortage of money.

A: Money is a commodity that is used for transaction that involves the transfer of goods and services.…

Q: Which one of the following statements is NOT true? (a)     Money is the most liquid asset. (b)…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: Does the lender of last resort function of central banks introduce moral hazard into the financial…

A: We will answer the first question since the exact one was not specified. Please submit a new…

Q: Explain why a bank typically holds as reserves only a fraction of its deposit liabilities? In light…

A: The required reserve ratio (RR) is the minimum amount of reserves that a bank must hold. It lowers…

Q: One limitation of using money as a store of value is that: a) money needs to be divisible and…

A: Money is considered to be a generally accepted payment for goods and services as well as in the…

Q: What is the multiplier effect of money supply.

A: Multiplier effect of money supply would be the increase in the circulation of money.

Q: Q.1.5 Which one of the following statements is NOT true?  (a) Money is the most liquid asset. (b)…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…