Monetary Economics (ECS3701) Selected Examination Questions and suggested solutions 2023

motivations to want to hold money balances - --transactions demand -precautionary demand -asset demand -transactions demand - --holding money as a medium of exchange to make payments -the level varies directly with nominal GDP -precautionary demand - --holding money to meet unplanned expenditures and emergencies -asset demand - --holding money as a store of value instead of other assets such as certificates of deposit, corporate bonds, and stocks -the demand for money curve - --assume the amount of money demanded for transactions purposes is proportionate income -precautionary and asset demand are determined by the opportunity cost of holding money (the interest rate) -y axis label (demand for money curve) - -interest rate -x axis label (demand for money curve) - -quantity of money -how does the fed influence interest rates? - -the fed seeks to alter consumption, investment, and total aggregate expenditures by altering the rate of growth ... -tools as monetary policy actions used by the feds - --open market operations -discount rate changes -changes in the reserve ratio