The quantity theory of money
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Question Description
Short Answer Questions:Consider the banking system. Reserves are deposits that banks have received but have not loaned out.
Banks must hold reserves. Why? (2 marks)
What are excess reserves? (1 mark)
How are excess reserves calculated? (1 mark)
What is the significance of excess reserves? (2 marks)
Consider the following statement in the short-run and the long-run: The quantity theory of money (quantity equation) states than an increase in the money supply will lead to an equiproportionate increase in the price level. Is this true or false? Explain. (4 marks)
A book, One World, Ready or Not – The Manic Logic of Global Capitalism, by William Greider, suggests that because of the rapid growth in productivity, output is increasing too fast – too fast, that is, for total demand to keep up. As a result, the economy could collapse as a result of overproduction.
Using the aggregate demand/aggregate supply diagram, illustrate the effect of increased productivity the short-run (holding the LRAS curve constant). (1 mark) (Be sure to add labels to indicate clearly the new equilibrium position)
What is the impact on unemployment and inflation as a result of the new equilibrium depicted in part a)? (1 mark)Explain this adjustment process. (3 marks)
Illustrate here (Tips: to create new lines, simply copy the existing curves and move to the new locations)
SRAS
AD
Inflation rate
Quantity of output
LRAS
4. Imagine that your major trading partners impose high tariffs on all goods, services and resources entering their countries. (6 marks)
Illustrate the short-run impact on your own economy in the diagram below. (Be sure to add labels to indicate clearly the new short-run equilibrium position) (1 mark)
What is the effect on the unemployment rate and the inflation rate in your nation in the short-run? (1 mark)
Economists argue that the economy will automatically self-correct, adjusting to a new long-run equilibrium over time. Clearly explain this adjustment process. (Be sure to explain the adjustment not just state that a curve shifts to restore long-run equilibrium ensure that this in your own words) (3 marks)
Illustrate here (Tips: to create new lines, simply copy the existing curves and move to the new locations)SRAS0
AD
LRAS
Inflation rate
Quantity of output
3 Lecture Slides on the topic are attached as well. Thanks
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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The quantity theory of money