Summarize the threemotives underlyingthe liquidity preference theory of moneydemand

Q: What does it mean for an asset to be liquid? Which of the assets listed below is the most liquid?…

A: A liquid asset is something that can be turned into money fast and readily while keeping its market…

Q: What evidence is used to assess the stability of themoney demand function? What does the evidence…

A: The velocity is used as the measure to check whether the demand for money in the economy is stable…

Q: A bank may also borrow reserves from its Federal Reserve District Bank at its “discount window.” The…

A: Federal funds rate - Federal Funds Rate is the rate at which the financial institutions lend reserve…

Q: What decisions do people make that can influence the money multiplier and thus the money supply?

A: People's actions will affect the multiplier of money and hence the supply of money. They can boost…

Q: To increase the quantity of money (the money supply), the Federal Reserve can O decrease the…

A: The vertical line in the money market highlights the money supply curve. It changes when the central…

Q: How should banks respond to mild liquidity deficiencies, severe liquidity deficiencies and…

A: Liquidity crunch is also known as Liquidity deficiencies where the demand for liquidity is higher…

Q: 12. what factors motivate the central bank to require tge two selected Dls to hold minimum amounys…

A: Central bank  The Central bank is considered an Apex body in a banking system of a country. Central…

Q: Explain the 4 ways the Federal Reserve would increase the money Supply and explain and graph how…

A: The monetary policy is the set of actions imposed by the central bank of the country to impact the…

Q: Find the value of Money multiplier when MPS=MPC

A: # we know that the sum of MPS and MPC is given to be as one  MPS+MPC = 1 If both are equal then we…

Q: The rate of interest charged by the Federal Reserve to member banks for reserves borrowed from the…

A: The Federal reserve is the central banking authority of United States that keeps stability in the…

Q: Explain what would happen if banks were notified they had to increase their required reserves by one…

A: Reserve ratio: It is the ratio or the percentage that has be maintained by the commercial banks in…

Q: Fiscal and Monetary Policy Assignment When the economy gets into serious problems, the government…

A: Recession refers to the situation where economic activities slow down and output growth is less than…

Q: Does the money supply "Cash held by public" get included in the calculation of the federal reserve…

A: The reserve requirement is the amount that the commercial banks have to keep aside out of total…

Q: When we sell 0.10 million in government bonds to typical bank, what is the new value of typical…

A: When a government sells bonds to a typical bank, it affects the bank's reserves and subsequently its…

Q: Which of the following best explains why the demand curve in the market for reserves has a flat…

A: A daylight overdraft happens where a financial balance is permitted to go overdrawn during the day…

Q: xi

A: The prevailing explanation of the nature of money supply as an external variable is the quantity…

Q: What is the difference between commodity money and fiat money? Is there a scenario you can think of…

A: Money is used for exchange purposes. Money is also used as unit of account and store of value.

Q: Whys is the actual Money Multiplier less than the potential Money Multiplier?

A: In an economy, money multiplier is used to understand the change in actual money supply due to…

Q: Assume the Federal Reserve has a federal funds rate target (ffr*) at 1.5%. If there is an unexpected…

A: Answer-   Target Rate :- It is rate that central bank intends to target keep interest rate around…

Q: Explain the factors on which an independent central bank can have positive impact and the factors on…

A: The central bank is the sole authority and major financial institution of the economy that indulges…

Q: Assume the Fed is trying to decide whether to lower the required reserve ratio to 8%. Currently, the…

A: Target Required reserve ratio = 8% Current required reserve ratio = 10%  Deposit = $500

Q: Which of the following policies by the Federal Reserve is likely to decrease the money supply? A.…

A: The Federal reserve often uses Monetary policy measures in order to control (Decrease/Increase) the…

Q: With the help of theory of liquidity preference describe, ‘why an increase in the money supply…

A: The theory of liquidity preference states that people demand money in order to remain liquid and…

Q: Which of these is the Fed likely to do during a recession? Select one: a. Sell government bonds…

A: Recession refers to the situation of economic slowdown, which is characterized by a fall in the…

Q: Assume that the banking system has total reserves of $200 billion. Additionally, assume that the…

A: Total reserve = $200 billion Required reserve = 25%

Q: Suppose the Fed buys $1 million of bonds from theFirst National Bank. If the First National Bank and…

A: Checkable deposits are known as the accounts against which the customer can draw the checks.…

Q: Use the theory of liquidity preference to explain howa decrease in the money supply affects the…

A: The Theory of Liquidity Preference states that's that money's demand Is not to borrow money but is…

Q: Use the following graph for the federal funds market to answer the next question. d Federal Funds…

A: The Federal funds rate is the rate of interest at which one financial institution lends money to…

Q: if people hold all money as demand deposits and banks maintain a reserve raitio of 12.5 percent…

A: Demand deposit : A demand deposit  is money deposited into a bank account with funds that can be…

Q: Assume that the bank makes these loans. What will the new balance sheet look like? By how much has…

A: Reserve requirements are how much finances that a bank holds for possible later use to guarantee…

Q: With an example each, explain in detail, the three motives of why individuals hold money

A: The three motives of why individuals hold money are discussed below.

Q: Discuss the motives of holding money to liquidity preference theory. according

A: Liquidity preference theory, proposed by John Maynard Keynes, makes sense of the interest for cash…

Q: According to the portfolio theories of money demand, whatare the four factors that determine money…

A: The portfolio theory of money demand is a collaborative effort by various economists like Tobin,…

Q: Explain the impact on current demand for money in the economy under the following conditions based…

A: The money supply refers to all of a country's currency and other liquid assets on the measurement…

Q: What "backs" the money supply of the United States? Multiple Choice the fact that currency is issued…

A: Money: Money is general is any object or item that can be used as a medium of exchange, store of…

Q: Assume that the Fed injects $100 million into the banking system with an open market purchase. Using…

A: Fed Inject $100 million