TOPIC: Dynamic Model of Money Explain this statement: "The dynamic model of money starts with the economy in a steady state, or long-run equilibrium."
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TOPIC: Dynamic Model of Money
Explain this statement:
"The dynamic model of money starts with the economy in a steady state, or long-run equilibrium."
Step by step
Solved in 2 steps
- ONLY QUESTION 2 The central bank of the country is concerned about the possibility that the country is going to face a high inflation rate, and it adopted a contractionary monetary policy as a result. Analyse how the central bank policy will affect the market for bonds: price, demand, and supply of bonds (hint: refer to relationship between the interest rate and the price of bonds). Using a graph of the money market, discuss how it will affect the demand for and the supply of money. Analyse the process of achieving equilibrium in the money market.Question 222 which two of the TEN PRINCIPALS OF ECONOMICS imply that fed can profoundly affect the economy? explain how these mechanisms work in 6 sentences with examples.Topic: Quantity theory of money. Answer 1, 2 and 3. What will happen to nominal GDP if, instead, the money supply decreases by 8 percent and velocity does not change? What will happen to nominal GDP if, instead, the money supply increases by 5 percent and velocity decreases by 5 percent? What happens to the price level in the short run in each of these three situations?
- Question 29 If the Reserve Bank increases the quantity of monetary base, then: the cash rate falls — economists call this contractionary monetary policy the cash rate falls — economists call this expansionary monetary policy the cash rate rises — economists call this contractionary monetary policy the cash rate rises — economists call this expansionary monetary policyThe monetary policy rate is the rate at which the Central Bank of Ghana lends to commercial banks. The results from table 4.4.1 shows that the monetary rate in Ghana declined from 2019 to 2021, before rising in 2022. The decline in the monetary rate from 2019 to 2021 can be attributed to an expansionary monetary policy, which was implemented to boost the economy of Ghana by reducing unemployment. The rise in the monetary rate in 2022 is a sign of a contractionary monetary policy, which is intended to reduce money supply and increase the cost of borrowing. This can help control inflation but may also lead to lower economic growth due to reduced aggregate demand (consumption). Consumption which is a component of GDP, the decrease in Aggregate demand will lead to decrease GDP and economic growth at large. Digitalization has become the norm in all parts of life, including finance. Mobile money has acquired substantial acceptance in Ghana as a simple mechanism for fund transfers, payments,…QUESTION 3We asked five students to give us three possible sources of an increase of the monetary base in the economy. Only one of the students came up with a completely correct list. This list included: an increase in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bank. an increase in central bank lending to banks, a sale of government bonds by the central bank, a sale of foreign currency by the central bank. a decrease in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bank an increase in central bank lending to banks, an increase in bank lending to firms and households, a purchase of government bonds by the central bank
- part-a: What is the relationship between the price level in a country and the value of money in that country? part-b: What is the impact of an expansionary monetary policy (such as a central bank lowering required reserve ratios) on the inflation rate and the value of money? What is the impact of a contractionary monetary policy (such as a central bank increasing required reserve ratios) on the inflation rate and the value of money? part-c: What is the classical dichotomy of nominal and real variables? How is the classical dichotomy related to the neutrality of money? part-d: Why is inflation referred to as a tax on holding money? part-a: What is the relationship between the price level in a country and the value of money in that country? part-b: What is the impact of an expansionary monetary policy (such as a central bank lowering required reserve ratios) on the inflation rate and the value of money? What is the impact of a contractionary monetary policy (such as a…SECTION B: ANSWER ALL QUESTIONS Using an appropriate diagram(s), explain the concept of direct and indirect finance. As a student of International Finance and Monetary Policy, explain the monetary policy approach the Central Bank should take when it wants to increase the GDP. Offer the tools that are available and the consequences, if any. Explain the theory of money demand and its relation to inflation in the economy. Use an appropriate equation to demonstrate this. Explain the concept of moral hazard in relation to financial systems.Question 7 Suppose a bank makes a loan to a small business so that business can purchase a new machine press. Which of the following are true of that event--that is, of the bank lending to the business? Question 7 options: The bank holds an asset in the form of the checking account opened up for the business. The bank becomes more liquid The bank holds an asset in the form of the loan agreement (the business' promise to repay the loan) The business becomes more liquid The business takes on a liability in the form of the loan agreement (the business' promise to repay the loan)
- Monetary policy: Monetary policy refers to the use of interest rates and other monetary tools by the central bank to influence the economy. In the case of a severe negative supply shock, the central bank may lower interest rates to stimulate borrowing and investment, which can boost demand and offset the reduction in supply. However, this may lead to inflation if the increased demand leads to higher prices, which can further erode the purchasing power of consumers. Explain this graphically please.Topic: Federal Reserve and the Central Bank Question: What is a bank run and why might a bank run worsen if a bank has to sell assets in response to depositors’ withdrawals?part-g: What is the discount rate? part-h: What is the federal funds rate? part-i: What problems does the FED encounter when trying to control the US money supply?
