EC2010: The Bank of Ireland decides to give a loan of €650,000 to Jim Show the entries on the Bank of Ireland’s Balance Sheet and im’s Balance Sheet: The Changing Economy : Money and Monetary Policy Assignment, UCC, Ireland

1.  The Bank of Ireland decides to give a loan of €650,000 to Jim. Show the entries on

i) the Bank of Ireland’s Balance Sheet and

(ii) Jim’s Balance Sheet. What has happened to the Aggregate Money Supply?  Explain your answer.

2. Pat uses a loan given to him by AIB to buy a house from Susan for €600,000 and this money is transferred to her deposit account at the BOI. Show these transactions on the Banks’ balance sheets result of this transfer. What has happened to the Aggregate Money Supply? Explain your answer.

3. Provide three examples of Money, giving reasons for your answer.

4. (a)Assume that it is a 2 good economy. The price of good A = €4; the amount of good A that is sold is 150; The price of Good B = €3; The amount of Good B that is sold is 150; If the Money Supply is 250, calculate the velocity of circulation of money. Explain your answer using relevant equations/theories.

(b)The long-run trend output is growing at 2.5% per year.  The velocity of circulation of money is predicted to fall by 1% per year. If the quantity of money is growing at 6% per year, what would price inflation be expected to be? Explain your answer using relevant theories.

5.      Distinguish between the Lump Sum Tax Multiplier and the Government Purchases Multiplier, using an example of each.

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