MGT 411 GDB Solution

MGT411

Discussion Question
Money Aggregate or money supply plays a crucial role in any economy, which not only counts the money supply at specific time period but also useful in taking different economic decisions. Definitions of different money aggregate are some how loosely defined but all the economists differentiate and classify M1, M2 & M3 on the single accepted base.

1.What is the main characteristic that distinguishes the different money aggregate definitions?
Solution:
Ans: The main characteristic that distinguishes the different money aggregate definitions is the Liquidity.
2.Which money aggregate definition is mostly used in economic decision around the world?
Solution:
Ans: M2 is used in economic decisions.
3. Justify answer given against part-b.
(provide only one reason)
Solution:
Ans: Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is a key economic indicator used to forecast inflation .