Answer to Question #291203 in Macroeconomics for Ochola

Question

Answer True or False, then justify your response with practical economic examples:

a. The introduction of mobile money transfers and ATMs has reduced the demand for money tending to lower interest rates. (5 marks)

b. Open Market Operations are more effective in a developing country like Kenya when compared with the Bank Rate Policy. (5 marks)

c. Since Quantitative credit control instruments are more targeted and more objective, it is always advisable that they be applied at all times over the Selective instruments. (5 marks)

d. Inflation is always associated with more money chasing few goods. (5 marks)

Answer 1

$Solution$

A)False .The introduction of ATMs as well as mobile money transfers has led to decreased demand for money as well as reduced borrowing due to high interest rates.

B)False. Its more effective in an open economy where there is a set out well organized and structured nature of money markets integrated with the central banking system and the traditional methods of credit control have no effect on it.

C)True. The criteria applies to the entire financial sector's ability to lend across the whole economy and makes no distinction between industries.

D) True ... there is more money in supply than the economy is actually growing/ the real output hence more money chasing few goods.