Monetary Economics (ECS3701) Selected Examination Questions and suggested solutions 2023

According to Smith, how does the debasement of coins affect individuals? - -Debasement of coins leaves individuals with less value. Each coin they have is worth less because there is less precious metal in the actual coin, allowing the issuer to repay debts incompletely. -What were the twin weakn...

Markets in which funds are transferred from those who have excess funds available to those who have a shortage of funds available are called ________ _______. - -financial markets -A key factor in producing high economic growth is ______-______ ________ ________. - -well-functioning financial mar...

According to the elasticity approach a domestic currency depreciation does what to the CA - -TYPICALLY, it narrows the CA, unless the marshall-lerner condition is met -What is the martial lerner condition and how is it satisfied? - -The marshall lerner condition suggests that a domestic currency ...

Discount Rate - -The interest rate financial institutions pay to the Federal Reserve to borrow reserves -Federal Open Market Committee(FOMC) - -A policy-making group within the Federal Reserve System that directs the open market operations of the system -Federal Reserve System - -The Central B...

Fed can stimulate the economy by... - -creating a loose-money policy and engages in: (increasing level of spending) 1.) buying government securities 2.) lowering the discount rate 3.) lowering the reserve requirement -The Fed can constrain economic activity when... (correcting high inflation...

1960s-1980s The Great ___________? - -Inflation -1980s-2007 The Great ___________? - -Moderation -2007-2010 The Great _____________? - -Recession -Dual Mandate Two Elements - -Price Stability and Maximum Employment -What is Monetary Policy? - -actions undertaken by a central bank to infl...

Monetary theory - -Explored the effect of the money supply on the economy's price level -Monetary Policy - -The FED's control over the money supply -Stock - -An amount measured at a point in time -Income - -An amount measured per period of time -Demand for money - -A relationship betwe...

15-1: Explain how the demand and supply of money determine the market interest rate - --The opportunity cost of holding money is the higher interest forgone by not holding other financial assets instead. -Along a given money demand curve, the quantity of money demanded relates inversely to the inte...

What determines aggregate prices and output? - -Aggregate demand and supply -What determines interest rates in the short-run? - -The Fed controls interest rate -How does fiscal policy affect the economy (Arrow) - -G up -> D up -> p,y up T up -> Y-T down -> C down -> D down -&gt...