about can be reinterpreted into our “M v = P Y” Take each of the following news headlines below and determine that event changes (increase or decrease) in: M or v or P
Monetary Policy and Equation of Exchange
The monetary policy has been defined as the policy that is used by the Federal Reserve (the central bank of the US) or the central bank (the central bank of India is RBI) along with the use of the supply of money to accomplish certain macroeconomic policies. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.
Monetary Economics
As from the name, it is very evident that monetary economics deals with the monetary theory of economics. Therefore, we can say that monetary economics, is that part of economics that provides us with the idea or notion of analyzing money as a holding with its function, which acts as the medium of exchange, the store of value through which the buying and selling are done and also the unit of account. It also helps in formulating the framework of the monetary policy of a bank in an economy which ultimately results in the welfare of the people residing in that particular economy. The monetary policy of an economy also helps to analyze and evaluate the financial health of it.
Do not give written explanations. Provide graphical solutions, circled answers or solve mathematical problems (show ALL work)
- Much economic news we read about can be reinterpreted into our “M v = P Y” Take each of the following news headlines below and determine that event changes (increase or decrease) in: M or v or P or Y based on your understanding of monetary theory. You answer each situation by simply listing the one variable from the equation you think has changed—only ONE. Use and upward or downward arrow next to the one variable to indicate if the change was an increase or decrease.
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“Deposits in U.S. banks fell in 2015.”
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“American businesses are spending faster than ever.”
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“Prices of most consumer goods rose 12% last year.”
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“Workers produced 4% more output per hour last year.”
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“Real GDP increased 32% in the last decade.”
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“Deflation grips the economy and households put off shopping”
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“A hyperinflation grips the US and people try to spend before prices rise.”
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“A banking panic erupts and people hold more cash at home.”
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