Briefly Explain the Significance of the Substitution Thesis/Zimring Analysis

question 48

Essay

Briefly explain the significance of the substitution thesis/Zimring analysis.

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Definitions:

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money.

Monetary Policy

The method used by a country's monetary authority to regulate the amount of money in circulation, typically aiming at a specific inflation or interest rate to promote economic stability and expansion.

Lender Of Last Resort

An institution, typically a country's central bank, that offers loans to banks or other financial institutions that are experiencing financial difficulty or are considered highly risky.

Open-Market Purchase

The buying of government securities by the central bank from the market to increase the money supply and decrease the interest rate.