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What are the main functions of money

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Reference no: EM133311612

1. What happens to the inflation rate when the unemployment rate is below the natural rate?

2. What are the main functions of money?

3. What are the two tools that the central bank has to control monetary policy?

4. If inflation is low and real GDP is below potential GDP, the central bank will take action to restore full employment. What happens to real GDP and the price level if the interest rate is lowered and investment in the loanable funds market is increased?

5. How does the central bank (following the example of the Fed in the United States) determine the appropriate level of the federal funds rate target?

6. What do people do when there is an excess supply of money?

7. Explain why credit cards are not considered money.

8. The deposits of which financial intermediaries make up the money of a country?

9. What components of aggregate spending change when the federal funds rate changes?

10. According to the quantity theory of money, in the long run, how is inflation determined?

11. What happens to consumer spending when the interest rate is low?

12. What happens to the long-run equilibrium when there is a decrease in the quantity of money?

13. What happens to the interest rate if the output gap is negative (recessive gap)?

14. What happens to the investment when the interest rate is low?

15. Mention the main economic benefits provided by financial intermediaries.

16. If inflation is low and real GDP is below potential GDP, the central bank will take action to restore full employment. In the market for loanable funds, if the amount of money in circulation increases, what happens in the market?

17. What is the role of a country's central bank?

18. What do people do when there is an excess demand for money?

19. What are the ingredients of a financial crisis?

20. Explain how financial intermediaries create liquidity.

21. What happens to net exports when the interest rate is low?

22. If inflation is low and real GDP is below potential GDP, the central bank will take action to restore full employment. In the money market, if the monetary base is increased, what happens to the interest rate and the quantity of money demanded?

23. What are the liabilities of the central bank?

24. What are the instruments used by the central bank, such as the United States Federal Reserve, to influence the quantity of money and interest rates?

25. What is the interest rate and what happens to the demand for money when the interest rate changes?

26. If the central bank changes the federal funds rate, which changes first: the inflation rate or real GDP?

27. What does the federal funds interest rate represent?

28. What happens to the interest rate if the output gap is positive (inflation gap)?

29. What happens to the long-run equilibrium when there is an increase in the quantity of money?

30. Briefly explain what the quantity theory of money consists of.

31. If inflation is low and real GDP is below potential GDP, what action does the central bank take in the market for bank reserves to restore full employment?

32. If the central bank changes the federal funds interest rate, what impact does it have on other macroeconomic variables?

Reference no: EM133311612

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