ECN 211 Study Guide - Open Market Operation, Demand Curve, Money Supply

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orangeturtle472

30 Oct 2014

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Document Summary

This motive for holding money is called: a: precautionary demand. c. speculative demand, noncyclical demand. _d_: assume the total demand for money schedule does not shift and the fed increases the money. Exhibit 16-1 money market demand and supply curves. Exhibit 16-3 money market demand and supply curves. Assume the money supply schedule in exhibit 16-3 shifts rightward from ms1 to ms2 and the. __e__ 10. economy is operating along the intermediate segment of the aggregate supply curve. The keynesian mechanism through which monetary policy affects the price level, real gdp, If m stands for the money supply, v for the velocity of money, p for the average selling price, and q for the output of goods and services, the equation of exchange (also called the quantity. Theory of money) is: mp = vq, mv = pq, mq = vp, mp = pq.

Related Questions

A. Match the correct motive (Precautionary Demand for money / Speculative Demand for money / Transactional Demand for Money) for holding money to the following definitions:

1. The stock of money people hold to take advantage of future changes in the prices of financial assets other than money.

2. The stock of money people hold to pay unpredictable expenses.

3. The stock of money people hold to pay everyday predictable expenses.

B. Identify the motive for holding money in the following scenario:

Musashi moves to a smaller apartment. Because of the lower monthly rent, he places a larger share of funds from his paycheck in a retirement fund and a smaller share in his savings account. This is an example of a decrease in Musashi's ____________________ demand for money.

C. Complete the following statement about the relationship between the interest rate and speculative balances.

As the interest rate rises, the opportunity cost of holding money _______________ and people ______________ their speculative balances.

blackcaribou48

1. Match the correct motive (Precautionary, Speculative, or Transactions) for holding money to the following definitions.

Definition
The stock of money people hold to pay unpredictable expenses
The stock of money people hold to take advantage of future changes in the prices of financial assets other than money
The stock of money people hold to pay everyday predictable expenses

2. Identify the motive for holding money in the following scenario.

Daesun moves to a smaller apartment. Because of the lower monthly rent, he places a larger share of funds from his paycheck in a retirement fund and a smaller share in his savings account. This is an example of a decrease in Daesun's (Precautionary, Speculative, or Transactions) demand for money.

Complete the following statement about the relationship between the interest rate and speculative balances.

3. As the interest rate falls, the opportunity cost of holding money (rises, falls), and people (decrease, increase) their speculative balances.