ECON_301_FALL_2008_HOMEWORK_3

ECON_301_FALL_2008_HOMEWORK_3 - In heterodox point of view,...

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In heterodox point of view, money supply is endogenous. Money is a necessary part of the normal economics system, which means that no matter in the short run or in the long run, money is not neutral. The central bank cannot control the money supply. I will analyze my view by following points. According to Friedman, money supply can be controlled by the central bank is not acceptable. The aim of the bank is to make monetary profit as well as that of the capital companies. So, as a result, it motive banks motive to make profit in such a process. It is no doubt that any influence of the central bank on the supply of money cannot be controlled. “The use of currency was based on essentially on the power of the issuing authority------i.e., that currency becomes money primarily because the coins are struck with the insignia of sovereignty and not so much because they happen to be made of gold, silver and copper”(Goodhart, The two concepts of money: implication for the analysis of optimal currency areas) Only a settled strong sovereign government can establishes the authorities that can offer an enough long time horizon and
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ECON_301_FALL_2008_HOMEWORK_3 - In heterodox point of view,...

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