Task 2 a) Find out about the function of money in the economy. b) Discuss the function of money in a situation where inflation is high and unpredictable. c) What should inflation be in an economy? Justify the answer thoroughly.

Task 2 a) Find out about the function of money in the economy. b) Discuss the function of money in a situation where inflation is high and unpredictable. c) What should inflation be in an economy? Justify the answer thoroughly.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter24: Money And The Federal Reserve System

Section: Chapter Questions

Problem 7SQ

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Book: Macroeconomic
Steinar, holden, oslo
Cappelen damm academic,2016

Task 2
a) Find out about the function of money in the economy.
b) Discuss the function of money in a situation where inflation is high and unpredictable.
c) What should inflation be in an economy? Justify the answer thoroughly.

Branch of economics that analyzes the behavior and performance of an economy as a whole. It focuses on the study of aggregates and evaluates changes related to unemployment, gross domestic product, inflation, monetary and fiscal policies of the government.

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Assume the supply of money is fixed by the authorities.
The speculative demand for money suggests that: (a) Individuals hold onto money for the purpose of engaging in transactions (b) As the rate of interest rate increases, the demand for money will rise (c) When the economy becomes more uncertain, people are more likely to hold unto money (d) The velocity of money is constant (e) As the rate of interest falls, the demand for money will rise.
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