AB 204 All Assignments AB 204 All Assignments | Page 10

In Westlandia, the public holds 50% of money one (M1) in the form of
currency, and the required reserve ratio is 20%.
2. Explain how each of the following changes quantity of money
(money supply) in the economy.
3. Assume that in a country the total holdings of banks were as follows:
AB 204 Unit 8 Assignment
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assignment
1. Long-run Macroeconomic Equilibrium and Stock Market Boom
Let us assume the economy reaches its long-run macroeconomic
equilibrium in 2020. When the economy is in the long run
macroeconomic equilibrium, the stock market will also reach its boom.
This will in turn lead to increases in stock prices more than expected,
and the stock prices will stay high for some period.
2) Studies indicate that net exports and net capital outflows tend to be
equal.