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

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 between the interest rate and how much money people want to hold. -Higher; greater - -The _____ the economy's price level! the ______ the demand for money. -Money - -Allows people to carry out economic transactions more easily and efficiently. -Demand for money - -Rooted in money's role as a medium of exchange. -Liquidity - -The bid advantage of money; money can be exchanged immediately for whatever is on sale -Interest forgone - -The opportunity cost of holding money -Equation of exchange - -M x V = P x V -Velocity of money - -The average no. of times per year each dollar is used to purchase final goods and service -Equation of exchange - -Says that the quantity of money on circulation equals the average price level times the real output -Quantity theory of money - -This states that is the velocity of money is stable, or at least predictable, changes in the money supply have predictable changes on the nominal GDP