What is Y variable?
What is Y variable?
Dependent variables A dependent variable represents a quantity whose value depends on how the independent variable is manipulated. y is often the variable used to represent the dependent variable in an equation.
Is money always Y?
When drawing the supply and demand for loanable funds, the interest rate is on the vertical axis, while savings and investment are on the horizontal. When drawing the supply and demand for money, the interest rate is on the vertical axis and money supply and demand are on the horizontal.
Why quantity theory of money is wrong?
First, the contention that money stock increases induce direct and proportional changes in the price level is empirically questionable (De Grauwe and Polan 2005). Secondly, there is the direction of causation.
What is price curve?
The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.
What is money demand curve?
The demand curve for money shows the quantity of money demanded at each interest rate. Its downward slope expresses the negative relationship between the quantity of money demanded and the interest rate. The relationship between interest rates and the quantity of money demanded is an application of the law of demand.
Who controls the money supply?
the Fed
What happens if money demand increases?
The demand for money shifts out when the nominal level of output increases. When the quantity of money demanded increase, the price of money (interest rates) also increases, and causes the demand curve to increase and shift to the right. A decrease in demand would shift the curve to the left.
Which of these would lead to fall in demand for money?
If real rate of interest is increases in the economy then it will decrease the real income with the people as a result of which purchasing power would be decreased which will decrease the demand for money in the economy.
What are the 3 main motives for holding money?
In The General Theory, Keynes distinguishes between three motives for holding cash ‘(i) the transactions-motive, i.e. the need of cash for the current transaction of personal and business exchanges; (ii) the precautionary-motive, i.e. the desire for security as to the future cash equivalent of a certain proportion of …
What are the two reasons why people demand money?
2 Reasons why people Demand Money? Transactions Demand, Asset Demand….Decrease the Reserve Ratio.
- Banks hold less money and have more excess reserves.
- Banks create more money by loaning out excess.
- Money supply increases, interest rates fall, AD goes up.
Why do we hold money?
One reason people hold their assets as money is so that they can purchase goods and services. People also hold money for speculative purposes. Bond prices fluctuate constantly. As a result, holders of bonds not only earn interest but experience gains or losses in the value of their assets.
What are the 5 reasons for holding cash?
ADVERTISEMENTS: The following points highlight the five main motives for holding cash balances in a firm. The motives are: 1….Motives for Holding Cash Balances in a Firm: 5 Motives
- Transaction Motive:
- Precautionary Motive:
- Speculative Motive:
- Future Requirements:
- Compensating Balances:
What is the disadvantage of holding money?
The disadvantage of holding money is that money earns little or no interest. When the IR rise on financial assets, the amount of interest that households and firms lose by holding money increases, so the quantity of money demanded decreases.
What are the 5 characteristics of money?
The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability.
What is the greatest quality of money?
Stability. Of all the qualities of good money, stability is probably the most essential one. The value of money cannot change for a long period of time and hence remain stable. If the value of money keeps changing, then it will fail to function as a measure of value and as a standard of deferred payment.
What are the six qualities of ideal money?
The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability. These are all critical characteristics of money.
What is the real use of money?
Money is often defined in terms of the three functions or services that it provides. Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money’s most important function is as a medium of exchange to facilitate transactions.
What is a good money?
Good Money is a digital online banking platform, often called a neobank, founded by Gunnar Lovelace. As a digital platform, Good Money takes no ATM or overdraft fees. The platform’s customers vote on where Good Money will invest profits, but their options only include sustainable investments.
What is not a function of money?
Primary function: The primary function of money includes money as a medium of exchange and money as a measure of value. 2. Secondary function: The secondary function of money includes money as a store of value and money as a standard of deferred payment. Therefore, power indicator is not a function of money.
Which one is equation of exchange?
The equation of exchange is an economic identity that shows the relationship between money supply, the velocity of money, the price level, and an index of expenditures. English classical economist John Stuart Mill derived the equation of exchange, based on earlier ideas of David Hume.
Is money a unit of account?
A unit of account is something that can be used to value goods and services, record debts, and make calculations. Money is considered a unit of account and is divisible, fungible, and countable.
How do the banks create money?
Banks create new money whenever they make loans. Banks can create money through the accounting they use when they make loans. The numbers that you see when you check your account balance are just accounting entries in the banks’ computers. These numbers are a ‘liability’ or IOU from your bank to you.