Given the consumption function, C= 0.8Y, and the investment function I = 102. - 0.2i, then the IS curve is ...( UGC net June 2014)
How to get Money Multiplier? Accordingly, the money supply, high-powered money (H) is the reserve ratio (RRr) prescribed by the central bank. It is known that excess reserve ratio (XRr) of commercial banks depends on currency held by the public and demand deposit ratio (C). Some of these depend on the behavior of the central bank, some on the behavior of commercial banks, and some on the behavior of the public. Let us propose an equation that tells how the behavior of the central bank, the behavior of the commercial banks, and the behavior of the people together determine the money supply and through it let us find out how each of the determinants of the money supply has a relationship with the money supply. To propose the money supply equation, money supply must be defined. We know that money supply is defined in different ways. We now propose a money supply equation following the traditional approach to defining money supply. Money supply=Ms Currency with Public= C Demand deposits of...