Money and Economy

1. If money supply changes, how it’s going to affect the price and value of money and why?

2. If money supply increases, how it’s going to affect value of money and price level?

3. What does it mean by the equation of exchange? Provide the components & how the equation
of exchange can be interpreted?

4. What is the main idea of simple quantity theory of money? Which variables are fixed in
simple quantity theory of money?

5. What are the main assumptions and limitations of simple quantity theory of money? How can
we relate the AD-AS framework with simple quantity theory of money?

6. Using the equation of exchange explain what are the main variables responsible for inflation.

7. What are the main positions of monetarists?

8. Using AD-AS framework explain monetarists. When we use AD-AS framework in

monetarism what variables change in short run & long run?
 Inflation
9. What are the tools for inflation calculation? What are the costs of expected inflation? Explain
any three.

10. What are the types of inflation? Explain in One-Shot Inflation what will happen to demand
side & it’s adjustment process.

11. In One-Shot Inflation what will happen to supply side & it’s adjustment process?

12. Why Demand-pull inflation occurs and what are the factors for that?

13. How Demand-pull inflation become continued? Explain with diagram.

14. How Continued inflation occurs in demand side? How is works & what are its adjustment
process?

15. What are the main reasons arise Cost-push inflation? How Cost-push inflation become
continued & explain its adjustment process?

16. “Inflation is always and everywhere a monetary phenomenon”. Is it addressing supply side or
demand side? Why it is called monetary phenomenon? Explain with diagram.

17. When money supply changes what variables does it affect? Explain the variables with
loanable fund market diagram.

18. Explain the supply of loans variable with loanable fund market diagram.

19. Explain the Real GDP variable with loanable fund market diagram.

20. Explain the price level variable with loanable fund market diagram.

21. Explain the expected inflation rate variable with loanable fund market diagram.
 The Fisher Effect
22. What does it mean by monetary neutrality & what are its components.

23. Let us assume that the real interest rate of investment is 3% and the inflation rate is 2%. 
Calculate the Nominal Interest Rate.

24. What is the main idea of fisher effect?