Econ Notes
Subject:
Economics [1]
Tags:
economics [2]
macroeconomics [3]
monetary policy [4]
money [5]
inflation [6]
Federal Reserve [7]
Central banks [8]
Economic policy [9]
Federal funds rate [10]
Interest rate [11]
Real interest rate [12]
deflation [13]
Business [14]
Notes Holding Money Means that I have money in such a way that it?s not earning any interest, not circulating, and has zero velocity.? Ex: money in a piggy bank? Demand for Money Transaction Demand Dt For purchase Varies directly with GDP Demand for money increases to purchase that which is produced by the economy, ie, GDP Simplification ( Dt is independent of interest rates) Asset Demand Da Money held as an asset, held for future investment Varies inversely with interest rates (opportunity cost) Precautionary Demand (brought up by Keynes) ?Rainy Day Money? You?re holding onto money for emergencies. Total demand for money, Dm =? Dt + Da and is the supply of money Bonds Bonds = Loans?