Macroeconomics 1

timer Asked: Mar 18th, 2013

Question Description

explain in your own words the process by which banks “create” money.

discuss the impact of that ability to create money on the economy during an inflationary gap, as well as during a recessionary gap.

considering the higher rates of unemployment and the likelihood of lower prices during a recessionary gap, do banks with their lending policies, contribute to a recovery back to potential output, or hinder that recovery? why do you believe your answer to be correct? what about during an inflationary gap?

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