Monetary Policy

Direction: Write your answer in the space provided.

Money supply vs Money demand

Money supply is the amount of money supplied in the public for the
people to consume. While Money demand is the demand of people of
money for their daily consumption.

Money vs Wealth

Money is the medium or current used in trading. While wealth is the

amount of money r properties a person have.

Flow vs stock

A flow, or flow variable, is an economic magnitude describing behavior

that occurs over time and is therefore meaningful only relative to the
unit of time. While A stock is a type of investment that represents an
ownership share in a company.

M1 vs M2

M1 money supply includes those monies that are very liquid such as
cash, checkable (demand) deposits, and traveler's checks. While
M2 money supply is less liquid in nature and includes M1 plus savings
and time deposits, certificates of deposits, and money market funds. 

M3 vs M4

The M3 measurement includes assets that are less liquid than other

components of the money supply and are referred to as “near,
near money.” While the M4 money supply is defined as a
measure of notes and coins in circulation (M0) + bank accounts.

Bonds vs Stocks
A bond is a fixed income instrument that represents a loan made by an
investor to a borrower (typically corporate or governmental). While
a stock is a type of investment that represents an ownership share in
a company.

Nominal Income vs Real Income

the nominal values of something are its money values in different

years. While  real values adjust for differences in the price level in
those years.

www.econlib.org 
www.investopedia.com
traders-paradise.com 
courses.lumenlearning.com
www.investorwords.com

Part 3: Reasercher

Direction: Research on the famous Quantity Theory od Money by John

Maynard Keynes.

List down and explain the important assumptions of Keynes’ Quantity

Theory of Money.
1. All factors of production are in perfectly elastic supply so long as
there is any unemployment.
2. All unemployed factors are homogeneous, perfectly divisible and
interchangeable.
3. There are constant returns to scale so that prices do not rise or fall
as output increases.
4. Effective demand and quantity of money change in the same
proportion so long as there are any unemployed resources.

http://www.yourarticlelibrary.com/economics/money/the-keynesian-
theory-of-money-and-prices-assumptions-superiority-and-criticisms-
economics/10961

What are the major criticisms on Keynes’ Quantity Theory of Money?

1. Direct Relation:
Keynes mistakenly took prices as fixed so that the effect of money
appears in his analysis in terms of quantity of goods traded rather than
their average prices. That is why Keynes adopted an indirect
mechanism through bond prices, interest rates and investment of the
effects of monetary changes on economic activity. But the actual
effects of monetary changes are direct rather than indirect.
2. Stable Demand for Money:
Keynes assumed that monetary changes were largely absorbed by
changes in the demand for money. But Friedman has shown on the
basis of his empirical studies that the demand for money is highly
stable.
3. Nature of Money:
Keynes failed to understand the true nature of money. He believed that
money could be exchanged for bonds only. In fact, money can be
exchanged for many different types of assets like bonds, securities,
physical assets, human wealth, etc.
4. Effect of Money:
Since Keynes wrote for a depression period, this led him to conclude
that money had little effect on income. According to Friedman, it was
the contraction of money that precipitated the depression. It was,
therefore, wrong on the part of Keynes to argue that money had little
effect on income. Money does affect national income.
http://www.yourarticlelibrary.com/economics/money/the-keynesian-
theory-of-money-and-prices-assumptions-superiority-and-criticisms-
economics/10961

Do you subscribe to the theory of John Maynard Keynes ? Justify.

Yes I do, because just like in our country, money has large role in
keeping our economy intact. In money plays a huge role in the lives of
every Filipino.