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12 marksMonetary Theory and Policy

CAPE Economics Unit 2 · 2006 · Paper 2 · Question 4(c)(ii)

Assume that the money market is initially in equilibrium and that the money supply is increased. With the use of a diagram, explain the adjustments toward a new equilibrium interest rate.

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Other parts of this question

  1. 4(a)(i)Discuss TWO advantages of paper money.[6 marks]
  2. 4(a)(ii)Discuss TWO advantages of cheques as compared to commodity money.[6 marks]
  3. 4(a)(iii)Discuss TWO disadvantages of commodity money.[6 marks]
  4. 4(b)Discuss the role of acceptability and fiat or law in determining the value of money.[12 marks]
  5. 4(c)(i)Discuss the basic determinant of the transactions demand for money and the speculative demand for money.[8 marks]

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