At the end of 2021, the Federal Reserve took an inventory of its foreign currency reserves. Since the previous year, the following had chang

Q: The following graph is called the monetary trilemma for open economuy. Please explain the current…

A: The trilemma is a financial hypothesis, which places that countries might browse three choices while…

Q: What three factors can affect the size of the reserve-to-deposit ratio?

A: The reserve-to-deposit proportion could be a degree utilized by banks and monetary teach to decide…

Q: Briefly describe how liquidity black holes can occur. How can regulation lead to liquidity black…

A: An counterpart of the run outcome in a bank run model is a "liquidity black hole." Traders with a…

Q: What is the effect of the following on the money supply?  i.    Increase in currency–deposit ratio,…

A: Money supply is the total money in an economy, which includes the currency in circulation, money…

Q: An expansionary monetary policy is one that O lowers government spending and lowers taxes O raises…

A: Monetary policy is a tool used by the Central Bank to maintain stable money supply in the economy.…

Q: How do the expansionary and contractionary monetary policy affect the quantity of money?

A: The credit-control system adopted by the central bank of a country to achieve its macroeconomic…

Q: Show graphically the effect on the money market of expansionary monetary policy. explain the overall…

A: Monetary Policy refers to change in money supply by the central bank for economic growth.

Q: Effect of Monetary Policy in the United States and Other OECD Countries Table 18.3 shows the effect…

A: Macroeconomics examines the working, composition, and dynamics of an economy. To comprehend and…

Q: Calculate the desired excess reserves ratio for the whole economy.

A: Total demand deposits in the economy = Demand deposits at Bank One + Demand deposits at Bank Two…

Q: What would be the value of the monetary multiplier if banks hold no excess​ reserves, the​…

A: The money multiplier, also known as the monetary multiplier or the deposit multiplier, is a concept…

Q: When the Federal Reserve sells government securities on the open market, what effect does this…

A: Whenever the government manipulate the open market by any of its actions then this means that this…

Q: If the U.S. economy is entering in a recession. What kind of directives may address using  monetary…

A: Recession refers to the situation where there is lower economic activity in an economy.

Q: Cheque account balances are not included in the money supply because it is not something the Reserve…

A: Bank is an establishment that deals in money and its substitutes and gives other money-related…

Q: Match each of the economic phenomena or policy goals to the associated monetary policy. Each item…

A: Monetary policy:It refers to the actions and tools that a central bank or monetary authority uses to…

Q: Countries normally attempt to manage their economy using monetary policy. By managing the money…

A: Concepts: The international flow of money refers to the inflow and outflow of money in an economy…

Q: The table to the right shows hypothetical values, in billions of dollars. Use the table to calculate…

A: The hypothetical situation with the money market is given below.…

Q: Choose the correct answer: The nation’s money supply will increase if (all else equal) There is an…

A: When talking about money supply, it can be said that it is the total amount of money that is…

Q: If the reserve ratio is 50%, what is the deposit multiplier?

A: Deposit multiplier is a factor by which maximum money supply changes when there is a change in…

Q: Let’s assume that the nominal Gross Domestic Product, GDP, of a hypothetical country is $36,000 and…

A: Money velocity is a measure of the pace at which money is exchanged in a given economy. The velocity…

Q: What is the fundamental difference between commodity money and fiat currency?     commodity money…

A: Answer: Commodity money: commodity money is made of metals so it possesses some intrinsic value.…

Q: Suppose you are the only currency holder in an economy, and you have $220 in currency. What would…

A: Money supply includes all the liquid currency in the economy. It includes both cash and deposits.…

Q: Before about 2008, the main tool of monetary policy was open market operations ; after 2008, the…

A: Monetary policy is among the two primary macroeconomic tools governments applies on controlling the…

Q: Explain why the Reserve Demand is perfectly elastic at Interest on Reserve Balance (IORB).

A: The demand for reserves in the market is typically a regular downward sloping demand curve due to…

IS-LM-PC Analysis

The IS (Investment Saving), LM (Liquidity Preference- Money Supply), and PC (Philips Curve) is the model that looks at the dynamics of output and inflation. It takes into account the central bank policy decision to adjust the inflation and real interest rate in the economy. It enables the economist to weather to priorities between employment and inflation rate analyzing the model. It is a practice-driven approach adopted by economists worldwide.  

IS-LM Analysis

The term IS stands for Investment, Savings, and LM stands for Liquidity Preference, Money Supply. Therefore, the term IS-LM model is known as Investment Savings – Liquidity preference money Supply. This model was introduced by a Keynesian macroeconomic theory which shows the relationship between the economic goods market and loanable funds market or money market. In other words, it shows how the market for real goods interacts with the financial markets to strike a balance between the interest rate and total output in the macroeconomy. This particular model is designed in the form of a graphical representation of the Keynesian economic theory principle. The output and money are the two important factors in an economy.