White Unit6-Yeager 87-100

Question 1

Yeager’s concepts of money as a medium of exchange

Answer 1

Not only as a concept of how much money people wish to hold money as a quantity, but also how to obtain and dispose them.

Question 2

Two concepts of liquidity

Answer 2

1) Purchasing Power

2) existence of medium of exchange(the relation between amount and the volume of transactions to be performed)

Question 3

Supply of money vs supply of near money. (Possible justification of increase in money supply?)

Answer 3

While it is no doubt that increase in money supply does create inflation, increase in near-money can cause perceived deflation.

Question 4

Lessons learned from Yeager

Answer 4

1) while excess and deficiency of goods and services can be corrected by the price, excess demand of money can damage the market transaction if the quantity is not enough to meet the volume of trade.
2) Money and near-money should be distinguished in terms of the medium of exchange. Central bankers should not encourage to provide broad list of assets that can be circulate in the market to be used as a medium of exchange.

Question 5

Fallacy of Composition

Answer 5

What may be true for individual maybe trues for overall.
Yeager example: Real bill doctrine. Expanding money supply by issuing debts may encourage individual to produce goods and services and payback debt, but this may not be true for all producers.

Question 6

Reverse Fallacy of Composition

Answer 6

What maybe true for overall maybe true for individual:
Yeager example: People adjust their demand of money to the given money supply to do the transaction. However, that does not mean it either easy to do it nor desire to do it.