Question 1:

(a) "Money demand is inversely related to interest rates and is stable over time." Discuss the theoretical and empirical validity of this statement.

(i) Analyse the different instruments used by the Central Bank to control money supply and discuss their efficiency.

(ii) Analyse the interest rate channel through which a monetary policy could be transmitted to the economy.

Question 2:

(a) Explain the rationale for conducting an expansionary monetary policy during periods of recession.

(b) Describe the channels for monetary policy transmission proposed by the credit view. Discuss their efficiency during periods of financial
crisis.

Question 3:

(a) Demand pull inflation is persistent while cost push inflation is not. Discuss.

(b) Analyse the monetary policy called inflation targeting.