İKTİSADA GİRİŞ II - Deneme Sınavı - 19

The most important task of a central bank is to control monetary system of the country and to ensure it works in stability in order to achieve the national objectives. For this purpose, central bank regulates supply, cost and availability of money and credit. Central bank’s function of controlling money supply originates partly from its monopolist power of issuing banknotes and partly from its power of creating and eliminating reserves for banking system by making/collecting loans and purchasing/ selling securities. As banknote issuing, historically, is accepted as a sovereignty symbol, central banks are non-profit organizations and operate as public institutions focusing on national interests. The correct answer is D.

Neutrality of money is the phenomenon indicating that changes in quantity of money do not have any effect in production amount (or real variables of the economy) but affect only in prices. The correct answer is C.

Speculative demand for money is the quantity of money that economic agents want to hold because of price uncertainty of financial assets other than money. The correct answer is C.

Precautionary demand for money is the quantity of money that economic agents want to hold with the intent of defraying unforeseen expenses. The correct answer is D.

Velocity of money is the number that represents, on average, how many times one unit of money is used for purchasing final goods and services.. The correct answer is D.

Any object that will be used as Money must fullfill all the three functions listed.

Commodity Money has two usage: as a good and as a medium of Exchange.

Liquidity is the possibility and speed of conversion of an asset to currency and demand deposit.

M2 = Currency in circulation + Demand deposits (TL and FX) + Time deposits (TL and FX)

Deposits are one of the liabilities for banks.

Deposit mone multiplier is defined as "1/required reserve ratio".

If Money supply is exogenous, the Money supply curve will vertical against interest rates.

There is a negative relationship between interest rate and demand for Money.

An increase in price level causes only to increase in interest rate since the quantity of Money is exogenous.

Since MV = PY, V = PY/M where M is the quantity of Money while PY represents the nominal GDP.

When considering the liquidity property, it is not easy to distinguish monetary things and non-monetary things. This kind of assets having a high liquidity but not used in payments directly are called as near (or quasi) monies.