increase in the reserve requirement Multiple Choice ___ increases the money supply by increasing excess reserves and increasing the monetary multiplier. ___ decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier. ___ increases the money supply by decreasing excess reserves and decreasing the monetary mutiplier
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.
An increase in the reserve requirement
Multiple Choice
___ increases the money supply by increasing
___ decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier.
___ increases the money supply by decreasing excess reserves and decreasing the monetary mutiplier.
___ decreases the money supply by increasing excess reserves and decreasing the monetary multiplier.
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