Question

1-What is the typical relationship between interest rate on three-month Treasury bills and on interest rate on corporate bond and growth rate of money supply.

2- If history repeat itself and we see a decline in the rate of money growth, what might you expect to

happen to

Budget deficit

The inflation rate

3- How does an increase in the value of the Israeli shekel affect American business

4- Some economist suspect that one of the reasons that economies in developing countries grows so slowly is they do not have well- developed financial markets. Does this argument make sense?

5-Why is simply counting currency an inadequate measure of money supply.

6-Explain the difference between representative full-bodied money and debt or credit money.

7-Explain the importance of money as a store of value

Answer 1

Ans:-1

i) Relationship between interest rate on corporate bond and 3 monthsT-Bills.

Corporate Bond is a risky assets as they are provided high interest in comparison to the interest rate on 3 months T- Bills which is a safest short term Government security and also considered a risk free instrument for the investors.

ii) Relationship between interest rate and growth of money supply.

If Money supply increases then Money supply would be greater than money demand which reduces the interest rate and vice- versa.

Please ask one question at a time for detailed explanation thankyou.