ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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endogenous
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exogenous
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Either A or B
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None of the above
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Detailed explanation-1: -money supply is exogenous, whereas monetarists view it as endogenous. A variable is. designated endogenous if it is determined within or by the model, and when it is. changed it, in turn, causes changes in output and employment.
Detailed explanation-2: -The supply of money is considered endogenous in this view as it is determined by firms’ need to pay for the costs of production. The production decisions of companies generate the demand for loans (Moore, 1988).
Detailed explanation-3: -Money supply is a stock variable because it is expressed at a particular point of time.
Detailed explanation-4: -Exogenous variables are variables whose cause is external to the model and whose role is to explain other variables or outcomes in the model.
Detailed explanation-5: -Endogenous money is an economy’s supply of money that is determined endogenously-that is, as a result of the interactions of other economic variables, rather than exogenously (autonomously) by an external authority such as a central bank.