6 marksMonetary Theory and Policy
CAPE Economics Unit 2 · 2009 · Paper 2 · Question 3(b)
State THREE reasons for holding money.
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Practise this questionOther parts of this question
- 3(a)(i)Define M1.[2 marks]
- 3(a)(ii)Define M2.[2 marks]
- 3(a)(iii)Define monetary transmission mechanism.[2 marks]
- 3(a)(iv)Define velocity of money.[2 marks]
- 3(a)(v)Define currency substitution.[2 marks]
- 3(c)Identify FOUR tools of monetary policy and explain how Central Banks in the Caribbean region can use these tools to help control inflation.[16 marks]
- 3(d)Use the Keynesian liquidity preference framework to illustrate how monetary policies can impact on interest rates and the demand for money.[8 marks]
- 3(e)With the use of examples, outline TWO reasons why Central Bank monetary policies to combat inflation may only achieve limited success.[10 marks]
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