Chapter Questions
What are the three functions of money?
List three monetary aggregates and the assets that these monetary aggregates include.
Why is money used in exchange when people could carry out transactions by trading goods or using credit?
How are the real interest rate, the nominal interest rate, and the inflation rate related to one another?
What is the real rate of interest on money?
What are the alternatives to using currency in transaction in the monetary intertemporal model?
What determines the demand for money in the monetary intertemporal model?
What are the effects of an increase in the money supply in the monetary intertemporal model?
What are three ways the government could bring about a change in the money supply?
Explain how money can be nonneutral in the short run.
How can monetary policy act to improve matters in the Friedman-Lucas money surprise model?
What are the drawbacks of money growth targeting?
Why is it a good idea for the central bank to engage in interest rate targeting?
List five monetary policy rules.
What happens when monetary policy is subject to the zero lower bound? Is there anything that the central bank can do in such circumstances to affect prices and real economic activity?