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Chapters: 29, 30, 31,33,34,35

1. Define Money with types and functions.

2. When central bank wants to increase the money supply with open market operations,

what does it do?

3. Eplain the concept of Money multiplier. !" Eplain the concept of multiple creation

of deposits under fraction reser#e system.

$. Which are the tools for monetary control and problems for controllin% the money

supply?

&. Eplain money supply, money demand and monetary e'uilibrium with the effects of a

monetary in(ection.

). Write a *ote on +isher Effect.

. Eplain the difference between nominal and real #ariables and %i#e eamples of each.

-ccordin% to the principle of monetary neutrality, which #ariables are affected by

chan%es in the 'uantity of money?

. What are the costs of inflation?

/. Define net eports and net capital outflow. Eplain how and why they are related.

10. Eplain "eal and *ominal echan%e rates with eamples.

11. hort note on purchasin% power parity.

12. Eplain three facts about economic fluctuation.

13. Eplain why the a%%re%ate demand cur#e slopes downward with dia%ram and also

eplain why the a%%re%ate demand cur#e mi%ht shift.

1$. Eplain the lon% run a%%re%ate supply cur#e and %i#e reasons why a%%re%ate supply

cur#e mi%ht shift.

1&. ist and eplain the three theories for why the short run a%%re%ate supply cur#e is

upward slopin%.

1). What is the theory of li'uidity preferences? ow does it help eplain the downward

slope of the a%%re%ate demand cur#e?

1. 4se the theory of li'uidity preferences to eplain how a decrease in the money supply

affects the a%%re%ate demand cur#e.

1. Eplain the ar%uments for and a%ainst acti#e stabili5ation policy. 6i#e an eample of 

a %o#ernment policy that acts as an automatic stabili5er.

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1/. Write a short note on ta%flation.

20. ow the 7hillips cur#e is related to the model of a%%re%ate demand and a%%re%ate

supply?

21. Why lon% run 7hillips cur#e is #ertical?

22. What is 8natural9 about the natural rate of unemployment? Why mi%ht the natural rate

of unemployment differ across countries?

23. ow epected inflation shifts the short run 7hillips cur#e?

2$. Eplain the effects of ad#erse shocks to a%%re%ate supply on the 7hillips cur#e.

2&. Eplain the cost of reducin% inflation.:sacrifice ratio;