MACROECONOMICS

1. Money vs. Barter

Money is used as the payment in exchange for the things that we want. As for Barter we have to
exchange goods and services without using money for us to get what we want.

Money as a medium of exchange solves the barter’s problem of lack of double coincidence of
wants as money has separated the acts of sale and purchase. You can sell goods for money to
whosoever wants it and with this money you can buy goods from whosoever wants to sell them.

Barter works when you have something you want and the other person must also have
something they want from you for the barter works.

2. Currency vs. Liquidity

Currency system uses an agreed-upon form of paper or coin money as an exchange system

For an asset, its liquidity is its ability to be bought or sold without any discount or premium. Liquidity
thus reflects the amount and frequency the asset and traded. A market that is liquid means it has many
trades and is composed of many traders. The Forex market is extremely liquid because hundreds of
banks and millions of individuals trade currencies every day.

3. What is money multiplier and how does it work?

The money multiplier, sometime called the monetary multiplier, measures the effect that a
change in banks’ required reserves has on the overall money supply of an economy. The influence a
central bank has over the money supply by altering the required banking reserve rate. It explains the
increase in the amount of cash in circulation generated by the banks' ability to lend money out of their
depositors' funds. When a bank makes a loan, it 'creates' money because the loan becomes a new
deposit from which the borrower can withdraw cash to spend. This money-creating power is based on
the fractional reserve system under which banks are required to keep at hand only a portion (between
10 to 15 percent, typically 12 percent) of the depositors' funds. The rest may be converted into loans,
thereby increasing the available cash by a factor that is a multiple of the initial deposit.
4. Fiscal &Monetary Policies: are they effective in our country, why or why not?

Fiscal policy involves changing government spending and taxation. It involves a shift in the
governments budget position. e.g. Expansionary fiscal policy involves tax cuts, higher government
spending and a bigger budget deficit. Government spending is a component of AD.
Monetary policy involves influencing the demand and supply of money, primarily through the use
of interest rates.

5. International trade vs. Globalization

International Trade is an exchange of goods or services across national jurisdictions. Inbound

trade is defined as imports and outbound trade is defined as exports. Subject to the regulatory oversight
and taxation of the involved nations, namely through customs.

Globalization refers to global economic integration of many formerly national economies into one
global economy, mainly by free trade and free capital mobility, but also by easy or uncontrolled
migration. It is the effective erasure of national boundaries for economic purposes.