show me the money

Question 1

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Question 2

What is money defined as?

Answer 2

A commodity or token that is generally acceptable as a means of payment

Money serves as a medium of exchange, unit of account, and store of value.

Question 3

What are the three functions of money?

Answer 3

• Medium of exchange
• Unit of account
• Store of value

Question 4

What does M1 in money supply represent?

Answer 4

Narrow range money or transaction money, including currency in active circulation and demand deposits

Examples include currency, coins, travelers’ cheques, and checking deposits.

Question 5

What does M2 in money supply include?

Answer 5

Medium range money, which provides savings easily convertible to M1

M2 includes M1 plus quasi-money such as savings deposits and fixed deposits.

Question 6

What is included in M3?

Answer 6

Wide range money, less liquid and considered short-term investments, including M2 plus longer-term time deposits

Examples include short-term government securities and Eurodollar deposits.

Question 7

Who manages the money supply?

Answer 7

The central bank

In Singapore, the Monetary Authority of Singapore (MAS) serves as the central bank.

Question 8

What is the relationship between money supply and interest rates?

Answer 8

The money supply curve is vertical, indicating it does not depend on interest rates but on the central bank’s decisions.

Question 9

What are the motives for holding money?

Answer 9

• Transaction motive
• Precautionary motive
• Speculative motive

Question 10

What factors affect the demand for money?

Answer 10

• Price level
• Real GDP
• Financial innovations

Question 11

True or False: An increase in the price level increases the demand for money.

Answer 11

True

Question 12

What happens to the money demand curve when real GDP increases?

Answer 12

It shifts to the right

An increase in real GDP increases the volume of expenditure, raising the demand for money.

Question 13

What is the equilibrium in the money market?

Answer 13

Quantity of money demanded equals quantity of money supplied.

Question 14

What effect does an increase in money demand have on interest rates?

Answer 14

It leads to an increase in interest rates.

Question 15

What does the Quantity Theory of Money state?

Answer 15

In the long run, money supply leads to price level changes

The equation is M x V = P x Y, where M is money supply, V is velocity, P is price level, and Y is real GDP.

Question 16

What is the impact of financial innovations on money demand?

Answer 16

It decreases the demand for money.

Question 17

Fill in the blank: Money can be held for a time and later exchanged for goods and services, serving as a _______.

Answer 17

Store of value

Question 18

What is the formula for the Quantity Theory of Money?

Answer 18

M x V = P x Y

Question 19

What is the speculative motive for holding money?

Answer 19

Holding money while waiting to invest in other financial assets.

Question 20

What happens to the quantity of money demanded when interest rates rise?

Answer 20

It decreases.

Question 21

What does an increase in financial innovations do to the demand for money?

Answer 21

It decreases the demand for money.

Question 22

What type of money is represented by M2?

Answer 22

Medium range money, including liquid assets.

Question 23

What is a central bank’s role in relation to money supply?

Answer 23

Regulates depository institutions and controls the quantity of money in circulation.

Question 24

What does a shift in the money demand curve indicate?

Answer 24

A change in money holding influences other than the interest rate.

Question 25

What are the components of Money Supply?

Answer 25

M1, M2, M3 ## Footnote M1 includes cash and checking deposits, M2 includes M1 plus savings deposits, and M3 includes M2 plus large time deposits.

Question 26

What are the functions of Money?

Answer 26

Medium of Exchange, Store of Value, Unit of Account ## Footnote These functions facilitate transactions, preserve value over time, and provide a standard measure of value.

Question 27

What factors affect Money demand?

Answer 27

Price level, Real GDP, Financial innovation, Speculative motives ## Footnote These factors influence how much money individuals and businesses wish to hold.

Question 28

Fill in the blank: The Quantity theory of money is represented by the equation _______ = _______ x _______.

Answer 28

M x V = P x Y ## Footnote M is the money supply, V is the velocity of money, P is the price level, and Y is real output.

Question 29

True or False: The primary motive for holding money is precautionary.

Answer 29

False ## Footnote While precautionary motives are one reason, transaction and speculative motives also play significant roles.

Question 30

What is the role of financial innovation in Money demand?

Answer 30

It can increase or decrease the demand for money ## Footnote Innovations can change how people use and perceive money, impacting overall demand.

Question 31

What is M1?

Answer 31

Cash and checking deposits ## Footnote M1 is the most liquid measure of the money supply.

Question 32

What is M2?

Answer 32

M1 plus savings deposits ## Footnote M2 includes all of M1 plus near-money assets.

Question 33

What is M3?

Answer 33

M2 plus large time deposits ## Footnote M3 is a broader measure of the money supply.

Question 34

What are the transaction motives for Money demand?

Answer 34

To facilitate everyday transactions ## Footnote People hold money primarily for purchasing goods and services.

Question 35

What is a Reference book for Macroeconomic concepts?

Answer 35

Parkin, M. (2016) Macroeconomic 12th Edition, Pearson ## Footnote This book provides comprehensive coverage of macroeconomic principles.

Question 36

Where can you find information on the functions of Money?

Answer 36

http://www.cliffsnotes.com/study-guides/economics/money-and-banking/functions-of-money ## Footnote This resource provides an overview of the roles money plays in the economy.

Question 37

What is the significance of the Price level in Money demand?

Answer 37

It affects the real value of money held ## Footnote Higher price levels decrease the real purchasing power of money.

Question 38

What is the relationship between Real GDP and Money demand?

Answer 38

Higher Real GDP typically increases Money demand ## Footnote As the economy grows, more transactions require more money.

Question 39

What does the term 'Store of Value' refer to in the context of money?

Answer 39

The ability to maintain value over time ## Footnote Money should not lose value quickly, allowing for future purchases.

Question 40

What is the primary purpose of the Unit of Account function of Money?

Answer 40

To provide a standard measure of value ## Footnote This function allows for easy comparison of prices and valuation of goods.

Question 41

What is the website that discusses the Quantity Theory of Money?

Answer 41

http://tutor2u.net/economics/revision-notes/a2-macro-monetarism.html ## Footnote This source provides insights into the Quantity Theory and its implications.