This is econ330 The Economics of Money Banking and Financial

  This is econ330. \"The Economics of Money, Banking and Financial Markets Eleventh Edition\"

CHAPTER 1:

Business Cycles, Money, and Policy Responses to Macro

Problems:

WHAT IS THE REALTIONSHIP BETWEEN MONEY AND BUSINESS

CYCLES? WHAT ARE THE TWO MAJOR MACRO PROBLEMS Fiscal and Monetary

Policy ATTEMPT TO ADDRESS? What are the important tools with which the

policy makers attempt to address these problems?

Solution

The money supply and business cycles are closely related . The increase in money supply will lower the interest rate thus leads to conducive environment for higher investment. This will result in the boom. The lower money supply coressponds to higher interest rate and lower demand thus there will be a depression in the business cycle.