Modern Theories of Money and Monetary Policy

Description Part A answer either 1. Money can be seen as developing from a competitive market process or through an authority imposing taxes. Explain and critically assess these two views on the origin of money. 2. Discuss the two main tenets of the endogenous money theory, namely that 'loans create deposits' and that 'deposits generate reserves' and their policy implications. Illustrate your answer using relevant diagrams and/or a balance sheet approach. Part B: answer either 1. "Instability is determined by mechanisms within the system, not outside it; our economy is not unstable because it is shocked by oil, wars or monetary surprises, but because of its nature" (Minsky, 1986). Discuss. 2. "[M]oney creation can be conducted more effectively and appropriately by the state than by commercial banks" (Dyson, Hodgson, van Lerven, 2016). Discuss.