Economics by Boyd and Smith Assignment Example | Topics and Well Written Essays - 1000 words

Economics by Boyd and Smith - Assignment ExampleAccording to the paper a store of value such(prenominal) that it holds its let value over a longer duration of time, although it does not elevate money so superior because there are other stores of value such as land. However, it is a portable store of value that is available in various convenient denominations, and lastly, it is a unit of account that provides a common flier for the value of commodities and services in exchange, which enables buyers and sellers to know how much of the goods to sell or purchase. Federal eserve controls the money supply by Setting the reserve requirement for banks, through with(predicate) buying and selling treasury bills and notes and by moderating the supply of money through lowering or raising the interest rates which are passed to the banks and at last to the consumers. This discussion outlines that the assumption of constant velocity implies that if an assumption is additional, the money veloci ty is constant, and then the equation yields a fundamental theory of the money effects cognise as the moneys quantity theory useful in determining the nominal GDP. Raising the inflation from 6 to 8 percent leave behind mean that the currencys interest rate catches up with the higher inflation rising by 6 points a year from their original value leaving the square return on that currency unchanged. Fiscal and Monetary policies play a role in causing ending hyperinflations, usually done by the of import bank or the government to ensure the control of flow of money, and therefore, minimizing both the exchange rates and the governments expenditure. The interest rate that is nominal is the utter rate of return on a financial asset e.g. the interest rate that a bank pays on deposition certificate while the historical interest rate is the rate, which is nominal on return and one adjusted for inflation.