Question

ANSWER TRUE OR FALSE :

1- M1 and M2 equations are related to reserve market (interbank). TRUE / FALSE

2- When there is a stable goods market (IS does not shift), the best target policy for central bank is interest rate targeting. TRUE / FALSE

3- The foreign exchange crisis in August 2018 in Turkey showed us that the impossible trinity has not been held anymore. TRUE /FALSE

4-  Keynesian interest rates channel is not the one among monetary tranmission mechanisms. TRUE / FALSE

Answer 1

1) The correct answer is false.

M1 and M2 equations are related to money supply.

There are the measures for determining money supply. Money supply is the total stock of money available in the economy at a point. It is the stock of money held by all the people in the country in form of cash and in bank accounts.

M1 measure-

According to M1 measure money supply = C + DD +OD

C= Currency and coins

DD= Demand deposits held with banks

OD = Other deposits

M2 measure -

According to M2 measure money supply = M1 + Savings and fixed deposits with bank + retail money market funds

Hope it helps!