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9 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Money functions? |
Medium of exchange Unit of account Store of value |
3 |
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Demand for money - reasons ? |
Transaction motive ( directly to Real GDP, income and price level) Speculative motive ( inversely to market rate of interest) |
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Relate "Bond Price" to "market rate of interest" Relate "Bond Price" to "Bond Yield" |
Inversely related - both. |
Direct or Inverse |
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Relate "speculative demand of money" with "market rate of interest". How ? |
InDirectly related. HIGH interest -> expectation of fall and hence capital gain from bond holding -> so ppl invest in bonds -> LOW money demand |
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Define/relate M1,M2,M3,M4. Which are narrow,which broad |
M1 = CU+DD M2 = [M1] + PO-savings M3 = [M1] + Net TD-commercial banks M4 = [M3] + total PO deposit except NSC
M3 aka Aggregate Monetary Base |
Diagram |
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What do you mean by high powered money? What other terms are used to denote it? |
Total liability of RBI i.e. Currency with public and vault cash of banks . + Deposits held by GoI & commercial banks.
High powered money = Monetary base |
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Money multiplier? > 1 or <1 or = 1 |
Ratio of stock of [ money] : [high powered money] i.e. M/H Always > 1 => total amount of money stock in economy is much greater than volume of high powered money. |
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CDR ? What does it imply? |
money held by public in CURRENCY : they hold in Bank DEPOSITS. People's preference for liquidity. Behavioural |
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What's RDR ? Two components of Reserve money ? |
Banks keep reserve and loan out rest. RDR = reserve/total money deposited in bank (i.e. proportion of total deposits comm banks keep as reserves) Reserve money = vault cash in banks + deposits of comm banks with RBI. |
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