The following set of equations describe the economy of country A. Lt = 0.2 Ysp = 10 - 2r Msp = 1000 Transactionary demand for money Speculative demand for momey Money supply 1. Interpret the 0.2 coefficient 2. Derive the LM equation and explain what it imply 3.0Highlight three factors that affect the transaction demand for money
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The following set of equations describe the economy of country A.
Lt = 0.2
Ysp = 10 - 2r
Msp = 1000
Transactionary demand for money Speculative demand for momey Money supply
1. Interpret the 0.2 coefficient
2. Derive the LM equation and explain what it imply
3.0Highlight three factors that affect the transaction demand for money
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- b. The following equation is used to model money supply under fractional-reserve bankıng: cr + 1 M x B cr + rr Identify the variables within the equation ii) i) Explain how the exogenous variables within the equation influence money supply and cause it to change. iii) Suppose the banks in an economy have a reserve-deposit ratio of 12 percent and the currency-deposit ratio is 25 percent. Also, the Central Bank increases the monetary base by $400 through open market operations, how would the money supply change?Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should be used: (1) money supply and demand (2) investment đemand schedule (3) AS/AD diagram. Interest rates is the variable that connects the first and second diagram). NGood day . can you please assist on the following question below Multiple-choice questions: Select one correct answer for each of the following Q.1.The ________ demand for money arises out of the need to hold money as amedium of exchange. This demand for money is a function of ________.(a) precautionary; interest rates(b) transactions; national income(c) speculative; interest rates(d) precautionary; national income Q.2. Which one of the following statements is NOT true? (a) Money is the most liquid asset.(b) Money is a store of value.(c) Money is a unit of account.(d) Money is another term for income.Q.3. Which of the following will cause the demand curve for money to shift to the right?(a) An increase in real Gross Domestic Product (GDP).(b) A decrease in the repo rate.(c) An increase in the quantity of money available.(d) A decrease in the quantity of money available.
- An economist who 450 3 analyzed the balance sheet of the Central Bank of the Republic of Turkey (CBRT) dated 25/05/2021 determines that, despite the increase of approximately 213 billion TL in reserve 350 money due to pandemic conditions since January 2020, the increase in the 300 ratio of Currency Issued/Central Bank Money, which indicates the liquidity need of the market, continues. - ReserveMoney Cur.Issued/CBMoney 400 2.5 2 1.5 250 1 This economist evaluates the 200 0.5 continuing increase in the need for liquidity despite the 100% increase in reserve money as "every lira released into the market turns towards the dollar and therefore the exchange rate increases". As an economist who knows the technique of analyzing the CBRT Analytical Balance Sheet, show that this colleague was mistaken, and that the increase in liquidity need stems not from the desire of the society to hold foreign currency, but from the monetary policy of the Central Bank. 2020-01 2020-02 2020-03 2020-04 2020-05…Suppose you have the following monetary asset information:Cash in circulation: $300bDemand deposits: $400bTraveler’s checks: $50bSaving accounts: $2000bMoney Market Mutual Funds: $1000bShort term time deposits: $500ba. Calculate M1 and M2.b. Recall that the quantity theory of money states that MV = PT. If the velocity ofmoney is presumed fairly constant, how is it helpful to measure the money supply(whether M1 and M2) for purposes of predicting inflation?Discuss the major contributions and implicationof the following theories of money demand; i. Quantity theory of money ii. Keynesian theory of money iii. Baumol-Tobin inventory theory model
- The U.S. Federal Reserve responded to the 2020 COVID-19 lockdowns by implementing an expansionary monetary policy, causing M2 money supply to rise from $15.3trillion in December 2019 to $18.3 trillion in July 2020. Over the same period, real GDP fell by 5.1 percent. a) Assuming that the velocity of money was constant over this period, what should the inflation rate be, based on the quantity equation? Show your work1. Consider the stationary equilibrium of the overlapping generations model with fiat money when the population is constant. a) Carefully setting up the budget constraints, characterize the equilibrium of the money market and derive an expression for the rate of return of fiat money in equilibrium. b) Use this model to illustrate the quantity theory of money. c) Suppose there is an additional asset in the economy, private loans. Discuss whether in equilibrium fiat money and private loans can coexist.What is the opportunity cost of holding money? Explain Baumol-Tobin model 20 of the demand for money. How can this model be estimated enpirically?
- How to answer a and b Suppose the monetary base is an economy is equal to 100 and nominal GDP is equal to 10,000. The money demand function is given as Md=$Y(0.4-2i). Interest rates are measured as a fraction. Suppose that initially people don't hold any currency and that the bank hold 10% of deposits as reserves. a) calculate the equilibrium demand for central bank money. b) solve for the equilibrium interest rate in the market for central bank money.The central bank of Barbados decides to pursue an expansionary monetary policy. i) identify one possible action they could take ii) Carefully explain in as much detail as possible, how the chosen action will impact money market. iii) Illustrate with a diagramthe overall impact of the chosen action on the money market.Question 3Explain in detail the process of Monetary Policy transmission of an increase in the cashinterest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cashrate ripple through the economy and lead to the target policy goal. (Three connected diagramsshould be used: (1) money supply and demand (2) investment demand schedule (3) AS/ADdiagram. Interest rates is the variable that connects the first and second diagram).