The Central bank of any country is a national bank responsible for the implementation of the monetary and fiscal policy of a country in order to avert or reduce inflation. This means that the bank is a vehicle through which the government accomplishes many of its economic objectives and deliver development to its citizens. Inflation can be too toxic to an economy as it diverts the economic intentions of any government. One of the impact of increased inflation is on an increased unemployment levels (Olivia Beria, 2016). i. Using Philips Curve, illustrate how increased inflations affects unemployment levels. ii. . Real money demand refers to the amount of money people want to hold in real terms, which means adjusted for inflation. It represents the desire for individuals to hold a certain amount of purchasing power in liquid form, in order to facilitate transactions and make purchases. The real money supply is equal to the nominal amount of M2, divided by the fixed aggregate price level, Real money supply, on the other hand, refers to the amount of money available in the economy that is adjusted for inflation. It is typically measured by the M2 monetary aggregate, which includes currency, checking deposits, and savings deposits. Explain the concepts of real money demand and real money supply in the context of macroeconomics. How do these concepts differ from nominal money demand and nominal money supply? Provide examples to illustrate your explanation
QUESTION ONE
The Central bank of any country is a national bank responsible for the implementation of the
monetary and fiscal policy of a country in order to avert or reduce inflation. This means that
the bank is a vehicle through which the government accomplishes many of its economic
objectives and deliver development to its citizens. Inflation can be too toxic to an economy as
it diverts the economic intentions of any government. One of the impact of increased inflation
is on an increased
i. Using
ii. . Real money
which means adjusted for inflation. It represents the desire for individuals to hold a
certain amount of
and make purchases. The real money supply is equal to the nominal amount of M2,
divided by the fixed aggregate
to the amount of money available in the economy that is adjusted for inflation. It is
typically measured by the M2 monetary aggregate, which includes currency, checking
deposits, and savings deposits.
Explain the concepts of real money demand and real money supply in the context of
nominal money supply? Provide examples to illustrate your explanation
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